The Economic Implications of Law: Nineenth Centiury Legal Innovation in New South Wales, the Wool Lien and Stock Mortgage
Abstract: This paper examines the introduction of the wool lien and stock mortgage in New South Wales (NSW) in 1843 with two main aims: 1) to determine the role played by these legal innovations in supporting pastoral sector growth given the particular endowments of the colony and; 2) to analyse whether this legal innovation suggests law makers of the time acted as instrumentalists. The endowment set in NSW included a variable climate, abundance of grassland, and scarcity of labour that made it eminently suited to large-scale wool production. The property rights that evolved for land over the nineteenth century made it impossible for pastoralists to use that asset to raise capital. Against the backdrop of the 1840s depression the legislature needed to create a method for pastoralists to access capital where sheep were their only property and they did so via the wool lien and stock mortgage. The lien and stock mortgage were non-possessory chattel mortgages unknown in English common law. However, due to the extreme economic conditions of the depression, the British Colonial Office Secretary did not veto the use of these financial instruments. Moreover, the instruments continued to operate well after the depression had eased. The statistical analysis presented here shows that, stock mortgages had a positive and significant affect on pastoral sector GDP between 1843 and 1860. This indicates that politicians both in NSW and England acted as instrumentalists where legal innovations were aimed at expediting economic change and ensuring continued community prosperity by promoting growth in important sectors of the economy.
