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The Economic Structure of TrustsTowards a Property-based Approach$
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M. W. Lau

Print publication date: 2011

Print ISBN-13: 9780199602407

Published to Oxford Scholarship Online: May 2011

DOI: 10.1093/acprof:oso/9780199602407.001.0001

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Trusts as Economic Firms

Trusts as Economic Firms

(p.81) 4 Trusts as Economic Firms
The Economic Structure of Trusts

M. W. Lau

Oxford University Press

This chapter tests the idea that the trust is an economic firm. All recent accounts of trusts are derived directly or indirectly from theories of the firm and they ought to be applicable to trusts if trusts are indeed firms. This chapter introduces concepts that are common to all these theories, including incentives, transaction costs, institutions, and organizations. It applies various theories of the firm to trusts to show that trusts cannot be explained with these theories. The chapter concludes by offering an explanation of why these theories do not apply to trusts, namely because trusts lack intra-firm transfers and market transactions.

Keywords:   theory of the firm, transaction costs, incentives, institutions, organizations, intra-firm transfers, market transactions

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