Currency Policies and Legal Development in Colonial New England
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Article Currency Policies and Legal Development in Colonial New England Claire Priestt CONTENTS I. THE EFFECTS OF CURRENCY SCARCITY ON MARKETS AND THE L AW ........................................................................................... 13 17 A. Barter, the Cost of Transacting,and Market Development ....... 1318 B. Public and Private Responses to Currency Scarcity in ColonialMassachusetts Priorto the Issuance of P ublic Currency ......................................................................... 1321 C. ColonialJudicial Remedies Before Widespread Public Currency Circulation................................................................. 1332 D. Assessing the Costs of Monetary Scarcity .................................. 1335 1. The Limitations of Money Substitutes .................................. 1335 2. Economics Scholarship on ColonialEconomic Growth...... 1339 II. PUBLIC PAPER MONEY ISSUANCE AND ITS EFFECT ON LITIGATION PATTERNS ..................................................................... 1342 A. The Demandfor GreaterCurrency ............................................ 1343 f Samuel I. Golieb Fellow, New York University School of Law. I wish to thank Christine Desan, Robert Gordon, Timothy Guinnanc, Ronald Michener, Edmund Morgan, Carol Rose, Susan Rose-Ackerman, Christopher Tomlins, James Whitman, and Sean Wilentz for providing valuable comments and encouragement. I am also grateful for the contributions of seminar participants at NYU's Legal History Colloquium, the John M. Olin Summer Fellows program at Yale Law School, and the American Society for Legal History. The John M. Olin program at Yale and the Samuel I. Golieb program at NYU provided generous financial support for this project. Finally, I thank Renato Mariotti and all those at The Yale Law Journal who provided editorial assistance. 1303 1304 The Yale Law Journal [Vol. 110: 1303 B. The Structure of ColonialPaper Money Policies ...................... 1345 C. The Legal and Economic Effects of Government Control over M onetary Stability............................................................. 1349 1. The Effect of Currency Issuance on the Colonial M oney Supply ..................................................................... 1350 2. ColonialMonetary Policy and the Potentialfor Currency C rises................................................................... 1352 3. Currency Policies, the Common Law, and ContractualRelations .......................................................... 1355 4. Currency Policies and Individuals' Litigation Strategies ... 1357 III. CURRENCY POLICIES IN MASSACHUSETTS, 1710-1750 .................... 1359 A. Expanding the Money Supply, 1710-1725.................................. 1360 B. The Currency Crises of the 1720s and 1730s and Their R esolution...................... :............................................................ 1368 IV. A CURRENCY POLICY EXPLANATION OF TRENDS IN DEBT L ITIG A TIO N ....................................................................................... 1384 A. The Modernization Analysis of Debt Litigation Data ................ 1384 B. Currency Crises and Debt Litigation Volume ............................ 1386 V. COLONIAL LAW AND THE ECONOMY: A REINTERPRETATION ......... 1396 A. The Centrality of Currency Policy and Politics to Debt Litigation Trends ........................................................................ 1397 B. Reassessing the Role of Courts in Promoting Economic G row th........................................................................................ 1399 1. N om inalism .......................................................................... 1400 2. The Colonial Court System and Economic Recession ......... 1402 V I. C ONCLUSION ..................................................................................... 1404 2001] Colonial Currency Policies 1305 Legal historians have long emphasized the role courts played in promoting the development of a market society in colonial America. Indeed, judicial enforcement of debt agreements and other contractual obligations has been viewed as the central and most important aspect of government promotion of the nascent colonial economy. Nevertheless, there has been substantial disagreement about the extent of colonial economic development and about colonists' attitudes toward markets and commercialism. Judges have been characterized in contrasting terms as bulwarks of pre-industrial cultural norms impeding development or as knowing catalysts of commercial transformation. Legal historians, however, have universally (if implicitly) agreed that focusing on the court system and judicial decisionmaking is the best means of assessing the role of law in economic development. An emphasis on judicial decisionmaking has led legal historians to accept two underlying assumptions about the relationship of law to the development of markets. First, colonial law has been generally perceived as rooted in inherently local cultural norms and local market conditions. When the principal source of law is considered to be the decisions imposed by judges on disputing parties, "law" in a more composite sense is naturally characterized as emerging endogenously out of relationships between individuals within local communities. Legal historians therefore principally see the impact of law on economic development as the combined effect of many individual decisions relating to the economic matters emerging within particular communities. Legal historians' focus on judicial decisionmaking has also led to an assumption that the law adjusts in some natural way to changing economic and cultural climates. According to this view, lawsuits are an indirect reflection of prevailing cultural norms and market conditions. Judges adapt the law as those norms and conditions change. The court system therefore fulfills an institutional role of ensuring that the law keeps pace with societal transformation. As described in greater detail below, however, colonial legal historians have characterized the court system not merely as keeping pace with changing conditions. According to current legal historical scholarship, whether by formalistically requiring parties to adhere to their commitments and thereby promoting economic advance and the extension of a market society, or by resolving disputes in a matter consistent with communitarian values, judges actively promoted an agenda in harmony with local preferences. Colonial courts are therefore typically depicted as optimally satisfying the legal needs of local communities. The most prominent description of the insular and community-oriented base of colonial law is in Morton Horwitz's The Transformation of American Law, 1780-1860. Horwitz emphasizes the centrality to eighteenth-century law of limitations on market activity such as the just 1306 The Yale Law Journal [Vol. 110:1303 price and usury doctrines, contracts involving transfers of property rather than monetary payments, and damages based on equity and fairness rather than on satisfying expectations.' Emphasizing the prevalence of litigation based on direct property exchanges, Horwitz concludes that the law reflected undeveloped markets and a community-oriented society in which goods "were usually not thought of as being fungible.... [and] [e]xchange was not conceived of in terms of future monetary return." 2 To Horwitz, colonial law reflected a pre-industrial communitarian mindset, "essentially antagonistic to the interests of commercial classes,"3 in which the justification for contractual obligation was "the inherent justice or fairness of an exchange." 4 Colonial law applied by judges, therefore, reflected the values associated with pre-industrial, agrarian societies.' In this respect, Horwitz contrasts the judicial doctrine of the eighteenth century with that of the nineteenth century, when judges began using common-law decisions to promote capitalist values and a market economy. With regard to both the colonial period and the nineteenth century, however, Horwitz portrays the law as harmoniously synchronized to advance prevailing cultural norms and preferences regarding economic advance. More recently, legal historians such as Bruce Mann and Cornelia Dayton have examined colonial court records and have developed a vastly different interpretation of colonial law and its relation to market activity. By focusing on legal practice and litigation trends, rather than strictly on 1. See MORTON J. HORWITZ, THE TRANSFORMATION OF AMERICAN LAW, 1780-1860, at 160-73 (1977). 2. Id. at 162-63. 3. Id. at 167. 4. id. at 160. 5. The scholarship supporting the conception of colonial law as static first gained prominence with ROSCOE POUND, THE FORMATIVE ERA OF AMERICAN LAW (1938), and includes GRANT GILMORE, THE AGES OF AMERICAN LAW (1977); WILLIAM E. NELSON, AMERICANIZATION OF THE COMMON LAW (1975) [hereinafter NELSON, AMERICANIZATION]; and WILLIAM F. NELSON, DISPUTE AND CONFLICT RESOLUTION IN PLYMOUTH COUNTY, MASSACHUSETTS, 1725-1825 (1981) [hereinafter NELSON, DISPUTE AND CONFLICT RESOLUTION]. See also Charles Fried, 93 HARV. L. REV. 1858, 1864-66 (1980) (reviewing P.S. ATIYAH, THE RISE AND FALL OF FREEDOM OF CONTRACT (1979)) (criticizing Atiyah for overemphasizing the extent to which judges valued community consensus above individuals' promises in the seventeenth and eighteenth centuries); Robert W. Gordon, Book Review, 51 N.Y.U. L. REV. 686, 687-88 (1976) (reviewing NELSON, AMERICANIZATION, supra) (criticizing Nelson for characterizing colonial