Law and Economics from an Evolutionary Perspective

Law and Economics from an Evolutionary Perspective

New Horizons in Institutional and Evolutionary Economics series

Glen Atkinson and Stephen P. Paschall

Law and economics are interdependent. Using a historical case analysis approach, this book demonstrates how the legal process relates to and is affected by economic circumstances. Glen Atkinson and Stephen P. Paschall examine this co-evolution in the context of the economic development that occurred in the nineteenth and early twentieth centuries as well as the impact of the law on that development. Specifically, the authors explore the development of a national market, the transformation of the corporation, and the conflict between state and federal control over businesses. Their focus on dynamic, integrated systems presents an alternative to mainstream law and economics.

Chapter 6: John R. Commons and co-evolution of law and economics

Glen Atkinson and Stephen P. Paschall

Subjects: economics and finance, economic psychology, evolutionary economics, law and economics, law - academic, law and economics

Extract

Law and the economy have co-evolved and will co-evolve. Empirical evidence from historical economic circumstances and court decisions reached contemporaneously with such circumstances proves that to be the case when analyzed using the historical case analysis approach of John R. Commons. They co-evolve through a dynamic, experimental process in which economic actions and legal decisions reflect expectations about the future. According to Commons “man lives in the future but acts in the present” (Commons [1934] 1961, p. 58). Co-evolution of law and economics is a dynamic process in which developments in each system are intended to achieve certain outcomes. The result may be the achievement of the intended outcomes but this process also may ignite endogenous forces that create conflicts and disputes which require resolutions that may alter legal authority and economic behavior. The outcomes of this co-evolution will not be transitions from one state of equilibrium to another nor be wealthmaximizing for the economy as a whole although, based upon resource allocation and power dynamics, the outcomes may be wealth-maximizing for some. The outcomes will form expectations about the future. Evolution of the economy and evolution of the law did not occur independently. Their relationship to each other is clear. Each was a function of the other and neither changed without having a causative effect on the other. Time, dynamism and experimentalism all contributed to this coevolution. The result is a transformed economy and a transformed legal system engaged with each other.

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