In the economic approach to law, legal rights are designed, in part, to overcome the conditions under which markets fail. In correcting for market failure, economic analysis endorses two rules for assigning legal rights. The first specifies the allocation of rights under conditions of rational cooperation, full information and zero transaction costs. Provided that exchange is available and that obstacles to exercising it are insignificant, rational cooperators will negotiate around inefficiencies. Under these conditions, legal rights are not assigned in order to establish optimal levels of resource deployment directly; rather, they establish well-defined entitlements or negotiation points which create a framework in which mutually advantageous bargains leading to optimal outcomes can be realized. This role of legal rights in securing optimal outcomes is suggested by the Coase Theorem.' The second rule for assigning legal rights specifies the procedures to be followed in the event the conditions of full information, rational cooperation and zero transaction costs are inadequately satisfied. Where impediments to successful negotiations are substantial, inefficiencies in the initial allocation may not be overcome through mutually advantageous exchange. Unable to rely upon the exchange process to overcome inefficiencies, a

The Uniform Commercial Code determines the content of most commercial law default rules by incorporating common merchant practices. The success of this incorporation strategy depends on the likely efficiency of evolved commercial practices. In this Article, I use the best available theory of cultural evolution to analyze how and why commercial practices evolve. This analysis confirms that the incorporation strategy is far superior to a system in which lawmakers rely predominantly on individual analysis and experimentation to design commercial law. But the analysis also demonstrates that common commercial practices, and the laws incorporating them, are unlikely to be optimal, in the sense that they cannot be improved at any cost. There is good reason, then, to explore supplemental strategies for enhancing the efficiency of individual commercial practices on a selected basis. The viability of such strategies will depend on their costs and likely success in improving on commercial practice.

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