Legal Institutionalism: Capitalism and the Constitutive Role of Law

Abstract

a b s t r a c tDeakin, Simon , Gindis, David , Hodgson, Geoffrey M. , Huang, Kainan , and Pistor, Katharina -Legal institutionalism: Capitalism and the constitutive role of law Social scientists have paid insufficient attention to the role of law in constituting the economic institutions of capitalism. Part of this neglect emanates for inadequate conceptions of the nature of law itself. Spontaneous conceptions of law and property rights that downplay the role of the state are criticized here, because they typically assume relatively small numbers of agents and underplay the complexity and uncertainty in developed capitalist systems. In developed capitalist economies, law is sustained through interaction between private agents, courts and the legislative apparatus. Law is also a key institution for overcoming contracting uncertainties. It is furthermore a part of the power structure of society, and a major means by which power is exercised. This argument is illustrated by considering institutions such as property and the firm. Complex systems of law have played a crucial role in capitalist development and are also vital for developing economies. Journal of Comparative Economics 45 (2017) 188-200. At this early stage of its development, legal institutionalism 1 involves claims concerning the nature of social reality, at least in modern, developed socio-economic systems. It does not yet provide a full theoretical approach, but it does provide some tentative and limited indications concerning theory and policy.There are two primary ontological claims. The first concerns the nature of law. It is argued that law (at least in the fullest and most developed sense) necessarily involves both the state (broadly construed to refer to a realm of public ordering) and private or customary arrangements. Reduction of law to just one of these two aspects is mistaken. As well as drawing from custom, law involves an institutionalized judiciary and a legislative apparatus.

Financial Fraud: A Literature Review

“…Such work could build on existing work in the field of comparative political economy and on literature in law and finance (e.g. La Porta et al, 1998;Coffee, 2005;Deakin et al, 2015). Another interesting issue for future research concerns the relationship between deregulation and financial fraud.…”

1688 and all that: Property rights, the Glorious Revolution and the rise of British capitalism

“…Instead, 'property rights' need to be much better understood. This basic injunction flows from the approach dubbed as 'legal institutionalism' (Deakin et al, 2016;Hodgson, 2015a).…”

The Law and Finance School: What Concept of Law?

“…Indeed, a central thesis of the present paper is that the shift in the LFS from the "quality of law" as the main explanatory variable to "legal origins" has considerably weakened the analytical power of the LFS approach and has undermined the initial attempts to contribute to our understanding of the impact of law on economic outcomes. In order to renew the initial ambition of the LFS to investigate the impact of law on economic practices and outcomes, this papers proposes a detour via legal theory (for other attempts see Deakin et al 2015;Milhaupt & Pistor 2008). In particular, the paper uses the notion of 'concept of law' to assess what the LFS has to say about law.…”

“…By the same token, law also has a constitutive function in the economy: Just like the rules of football do not just regulate the corner kick, but actually create it in the first place, law does not just regulate the economic "game", but creates it through the rules and institutions that it puts at actors' disposal (cf. Deakin et al 2015). 2 A further aspect of the nature of law, according to Hart concerns the distinction between primary and secondary legal rules.…”