- New Horizons in Institutional and Evolutionary Economics series
Chapter 6: John R. Commons and co-evolution of law and economics
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  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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