In doing so, they have produced both normative arguments seeking to justify particular ways that corporate law ought to treat problems of corporate governance and positive arguments offering explanations of how such laws have been established. In short, the book offers a classic statement of the economic analysis of law approach, thus, providing the reader with an opportunity to assess both the strengths and weaknesses of the approach. Let me briefly state the logic of the Easterbrook-Fischel analysis. Given the fundamental importance of capital for the growth and development of corporations, the equity investors are seen to have the primary effect on the nature and structure of these contracts. If they fail to do so, investors will take their money elsewhere and through the dynamics of market competition the less efficient corporations will die.
Corporate law enters into the analysis as follows.
The law serves as a framework that enables the actors to enter into wealth- maximizing contracts. The normative thesis of the book is that corporate law should contain the terms people would have negotiated, were the costs of negotiating at arm's length for every contingency sufficiently low. The positive thesis is that corporate law almost always conforms to this model. It is enabling rather than directive. A few examples may give more of the flavor of the arguments.