Institutional Law and Economics: The Legal-Economic Nexus

I spent the last two weeks reading some of the work of insitutionalist John R. Commons in preparation for a reading group centered on topics around capital and capitalism. I thought I'd share a crib-notes version of some of Commons thoughts regarding the relationship between law and economics, particularly from his 1925 article Law and Economics. This is in no way an exhaustive summary of the paper, which also includes numerous historical references and exploration of foundational econ topics such as capital and scarcity.  In this nearly century-old piece, Commons considers why "the two sciences of law and economics" have not been treated as one and advanced together.  He asks us to consider the core economic concept of scarcity (among others) and how they are fundamental to the legal concept of property.   It is in thinking about property and rights, and how they are defined, that Commons makes his case for a stronger joint understanding of law and economics. Given the f...

Complexity science and complexity science economics has become a very popular part of scientific thinking.  The general idea is that the individual parts of a system interact and emergent behavior occurs that is often difficult to predict. Eric Beinhocker wrote a book in 2006 entitled "The Origins of Wealth" that focused on complexity science economics*.  In that book he defined complexity science economics as involving: 1) the economy is dynamic and nonlinear, 2) individual agents are modeled with bounded rationality, 3) interactions between economic agents is key in networks, 4) there is no distinction between micro and macro and system behavior is emergent and 5) the system evolves without equilibrium over time. What does this set of ideas have to do with capitalism and its critique of socialism? In terms of socialism, complexity science is in line with Hayeks critique.  The concepts underlying complexity science that individuals agents knowledge cannot be captured cen...

Last week, Eric wrote about George Will's thoughts on capitalism and the spontaneous order . I haven't yet read the book,   The Conservative Sensibility (2019) but being from the rural Midwest, I'm pretty familiar  with the conservative heart of his work. Check out Eric's post for a brief  run-down. What's most interesting to me in these kinds of arguments about capitalism and social order is that there are often two distinct kinds of discourse occurring:  we have the defense of some idea or view of how the world ought to be, and we have discussion of how the world currently is, and how we might address issues in it (Will engages in both at times, the former more so in his book, the latter in his columns). What we rarely get in either type of discourse is a clear, detailed definition of the role of government.   There is plenty of opposition to the "centrally planned economy" on the basis of the work of Hayek (the  knowledge problem ) and Ludwig ...

The idea and concept of capitalism may have many different definitions which makes it difficult to assess arguments for or against capitalism.  George Will is a principled defender of capitalism and the spontaneous order. We unpack his arguments here to make sense of what case can be made in defense of capitalism.  This information comes from George F. Will, "The Conservative Sensibility" from 2019.* George Will's defense of capitalism is not necessarily anything new but is instructive on how the conservative side thinks about the arguments needed.  The definition of capitalism can often be elusive but is generally defined as having to do with a system dependent on private property ownership, a price system and reliant on voluntary exchange.  To defend this system, Will primarily relies on Hayek's idea of information and Locke and others defense of private property and the moral implications of those who act within a market.   Will subtitles the chapter in his b...