Simon Deakin and Fabio Carvalho INTRODUCTION 1. The aim of this chapter is to explore the scope for synthesis between systems theory and new institutionalist approaches within economics. Such a project has the potential to offer, among other things, a more fully rounded view of legal evolution. At first sight it may seem that the methodological assumptions of economics are too far removed from those of systems theory for any kind of synthesis to be feasible. Economics describes itself as a behavioural science which studies the logic of choice under conditions of scarcity. Systems theory, on the other hand, focuses on the communicative processes through which social order is reproduced over time. In most contexts the two disciplines address different questions and use mutually incompatible techniques. However, as economics becomes increasingly concerned with the role institutions play in coordinating the behaviour of economic agents, it encounters a set of issues which are also central to systems theory. The nature of the link between legal change and economic development is one of these issues, and the interdisciplinary field of ‘law and economics’ now provides the terrain on which rival conceptions of the evolutionary process are being advanced. We begin our analysis by attempting to unpack the ontological assumptions made about law and the legal system within different strands of the law and economics literature, and to draw out their implications for both normative and positive analysis. We use examples taken from the economics of company law and corporate governance to illustrate...
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