The Courts and the Development of Trade in Upper Canada, 1830-1860 Author(S): Peter George and Philip Sworden Source: the Business History Review, Vol
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The President and Fellows of Harvard College The Courts and the Development of Trade in Upper Canada, 1830-1860 Author(s): Peter George and Philip Sworden Source: The Business History Review, Vol. 60, No. 2 (Summer, 1986), pp. 258-280 Published by: The President and Fellows of Harvard College Stable URL: http://www.jstor.org/stable/3115309 Accessed: 10-02-2017 14:35 UTC REFERENCES Linked references are available on JSTOR for this article: http://www.jstor.org/stable/3115309?seq=1&cid=pdf-reference#references_tab_contents You may need to log in to JSTOR to access the linked references. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://about.jstor.org/terms The President and Fellows of Harvard College is collaborating with JSTOR to digitize, preserve and extend access to The Business History Review This content downloaded from 129.100.49.67 on Fri, 10 Feb 2017 14:35:48 UTC All use subject to http://about.jstor.org/terms The Courts and the Development of Trade in Upper Canada, 1830-1860 PETER GEORGE AND PHILIP SWORDEN ? The centrality of transportation improvements andfinancial institu- tions to the economic development of Upper Canada in thefirst half of the nineteenth century is well known. In this article, Professor George and Mr. Sworden argue that the evolving legal system and legal insti- tutions also played an important role as part of the infrastructure con- tributing to increased economic efficiency. In support of their thesis, they draw on court decisions on contract and property law, primarily from the judicial career of Sir John Beverley Robinson, chiefjustice of the Court of Queens Bench for Upper Canada from 1829 to 1862. Economic historians readily acknowledge the importance of so- cial overhead capital in providing a framework within which directly productive investments can take place. They portray such infrastruc- tural investments as "enabling" conditions in the growth process, often valuable for their own private profitability, but more commonly for the significant externalities that they generate. The role of infrastructural investments in the economic development of Upper Canada (Canada West after the Act of Union in 1841, re- named Ontario at Confederation in 1867) has generally been limited to analyses of transportation and financial institutions. The economic history of Upper Canada is still typically interpreted within the staples approach, with most emphasis being placed on timber, wheat, and flour as the leading export sectors propelling the colonial economy.1 Transportation improvement-first in the road and canal networks, and after 1850 in the development of the railway grid-lowered the real costs of moving commodities. Development of transportation fa- cilities is therefore seen as a precondition for investment in staple pro- PETER GEORGE is dean of social sciences and professor of economics at McMaster University; PHILIP SWORDEN is a lawyer practicing in Hamilton, Ontario. The authors have benefited greatly from Douglas McCalla's knowledge of the conduct of nineteenth- century business. They would like to thank F. T. Denton, Richard S. Tedlow, and two anonymous referees of the Business History Review for their helpful comments. An earlier version of this paper was presented at the annual meeting of the Social Science History Association, October 1984. A recent contribution is John McCallum, Unequal Beginnings: Agriculture and Economic Develop- ment in Quebec and Ontario Until 1870 (Toronto, 1980). For a more skeptical assessment of the staples model, see Douglas McCalla and Peter George, "Measurement, Myth, and Reality: Reflections on Ap- proaches to the Economic History of Nineteenth-Century Ontario," Research Program for Quantitative Studies in Economics and Populatioh Working Paper No. 138, McMaster University (July 1985): 2-6. Business History Review 60 (Summer 1986). ? 1986 bv The President and Fellows of Harvard College. This content downloaded from 129.100.49.67 on Fri, 10 Feb 2017 14:35:48 UTC All use subject to http://about.jstor.org/terms GEORGE and SWORDEN: CANADIAN COURTS AND TRADE 259 duction and, consequently, as an important element in expanding the area from which staple commodities were drawn into the commercial system of the St. Lawrence. The establishment of financial institutions has also been credited with an important role in expanding the reach of the colonial economy; by lowering the real costs and risks of capital mobilization and lending, they facilitated the flow of capital and con- tributed to the growth of trade. The legal system and legal institutions represent the authoritative context within which business is conducted, and as such they have had a significant, but much less explored, impact on the economics of trade in Canada. The adoption by Upper Canada of the basic principles of British contract and property law and their subsequent refinement to meet local conditions, and the establishment and evolution of legal institutions, particularly the courts, to enforce the law, led to reduc- tions in risk and in transaction costs (that is, costs of doing business) for people engaged in business.2 The law and its enforcement consti- tuted important infrastructural elements contributing to increased eco- nomic efficiency in Upper Canada in the mid-nineteenth century.3 The relationship between the law and economic development has been a rapidly expanding area of study in the United States.4 Relatively little work, however, has been done in Canada, with the exception of a fine series of articles on the law and economy of Canada West, 1841- 67, by R. C. B. Risk.5 According to Risk, by 1860 a comprehensive public philosophy had emerged in Canada West that regarded eco- nomic progress, especially resource exploitation, as a public good, to be achieved primarily by private initiative facilitated where possible 2 In the conduct of business, real resources are employed in obtaining information and enforcing contracts. Much of the economics of allocative efficiency is predicated on the assumption that transactions are costless, and that information about costs and prices is freely available. In fact, transaction costs are positive and represent an impediment to the working of competitive markets and the achievement of economic efficiency-hence, the recent upsurge of interest in transaction cost economics. The most in- teresting application, from the perspective of a business historian, is Oliver E. Williamson's examination of the bases of vertical integration. See, in particular, Markets and Hierarchies: Analysis and Antitrust Implications (New York, 1975) and "The Modern Corporation: Origins, Evolution, Attributes," Journal of Economic Literature 19 (1981): 1537-68. 3 When resources are being employed where their value is highest, they are being employed effi- ciently; they are producing the largest possible output. Transaction costs are sources of inefficiency. 4 See, among others, Morton J. Horwitz, The Transformation of American Law 1780-1860 (Cam- bridge, Mass., 1977) and James Willard Hurst, Law and Markets in United States History (Madison, Wis., 1982). Richard A. Posner, Economic Analysis of Law, 2d ed. (Boston, 1977) provides an excellent standard treatment of the relationship between the law and economic reasoning. 5 R. C. B. Risk, "The Nineteenth-Century Foundations of the Business Corporation in Ontario," University of Toronto Law Journal 23 (1973): 270-306; "The Golden Age: The Law about the Market in Nineteenth-Century Ontario," ibid. 26 (1976): 307-46; "The Last Golden Age: Property and the Alloca- tion of Losses in Ontario in the Nineteenth Century," ibid. 27 (1977): 199-239; "The Law and the Econ- omy in Mid-nineteenth Century Ontario: A Perspective," ibid.: 403-38. More recently, David Flaherty has provided a comprehensive assessment of the state of Canadian legal history, including some pointed comments on the legal history of Upper Canada in particular. See David H. Flaherty, ed., Essays in the History of Canadian Law (Toronto, 1981), 1:3-42. This content downloaded from 129.100.49.67 on Fri, 10 Feb 2017 14:35:48 UTC All use subject to http://about.jstor.org/terms 260 BUSINESS HISTORY REVIEW SIR JOHN BEVERLEY ROBINSON Shown here during the 1850s, Robinson served as chiefjustice of the Upper Canada Court of Queen's Bench from 1829 to 1862. Deeply concerned with the commercial prosperity of the colony, he presided over many court cases involving contract and property disputes. (Photograph reproduced from C. W. Robinson, Life of Sir John Beverley Robinson [Toronto, 1904].) This content downloaded from 129.100.49.67 on Fri, 10 Feb 2017 14:35:48 UTC All use subject to http://about.jstor.org/terms GEORGE and SWORDEN: CANADIAN COURTS AND TRADE 261 by government support. Although the Legislative Assembly was ag- gressive in promoting economic change, Risk concluded that the Ca- nadian courts, based in the English common law, were content to ac- cept and apply settled law favorably for commerce when possible, but were reluctant to promote change in the law to encourage economic development.6 Without questioning this conclusion, it is important to examine the way in which contemporaneous court decisions reflected basic economic principles of resource allocation; these decisions can then be evaluated in terms of their consistency with the goal of increas- ing economic efficiency. These issues are examined here by focusing on the judicial career and decisions of Sir John Beverley Robinson. Born in 1791 into a Loy- alist family whose members were refugees from the American Revo- lution, Robinson had a remarkable career.7 Fatherless at seven, he be- came attorney general of Upper Canada when he was only twenty-one, before he was even called to the bar; he was named solicitor general in 1815, and reappointed attorney general from 1818 to 1829.