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Legal Evolution: Integrating Economic and Systemic Approaches

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  • Deakin, S.
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    Abstract

    This paper explores the scope for synthesis between economic and systemic approaches to the understanding of legal evolution. The evolutionary and epistemic branches of game theory predict that stable norms will emerge when agents share common beliefs concerning future states of the world. Systems theory see the legal order as a social system which reproduces itself by recursive acts of legal communication, thereby giving rise to self-reference and operational closure. At the same time, the legal system is cognitively open, that is to say, indirectly influenced by other social systems in its environment. This gives rise to the possibility of coevolution of law and the economy. It will be argued that systems theory, by developing the idea of law as an adaptive system with cognitive properties, provides a missing link in the evolutionary theory of norms. Recent game theoretical models imply that common knowledge is not entirely endogenous to agents' interactions, but depends to a certain extent on emergent normative structures. These include the public representations of common knowledge which are provided by the legal system. The paper will explore the implications of this idea, argue for an integrated economic and systemic analysis of legal evolution, and consider some of the theoretical and methodological implications of such a step.

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    File URL: http://www.cbr.cam.ac.uk/pdf/WP424.pdf
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    Bibliographic Info

    Paper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp424.

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    Date of creation: Jun 2011
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    Handle: RePEc:cbr:cbrwps:wp424

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    Web page: http://www.cbr.cam.ac.uk/

    Related research

    Keywords: Legal evolution; game theory; correlated equilibrium; social norms; systems theory; contract theory; legal origins;

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    References

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    1. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2007. "The Economic Consequences of Legal Origins," NBER Working Papers 13608, National Bureau of Economic Research, Inc.
    2. Arrighetti, Alessandro & Bachmann, Reinhard & Deakin, Simon, 1997. "Contract Law, Social Norms and Inter-firm Cooperation," Cambridge Journal of Economics, Oxford University Press, vol. 21(2), pages 171-95, March.
    3. Aoki, Masahiko, 2010. "Corporations in Evolving Diversity: Cognition, Governance, and Institutions," OUP Catalogue, Oxford University Press, number 9780199218530.
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    Cited by:
    1. Dieter Schmidtchen & Roland Kirstein, 2012. "Ordnung," FEMM Working Papers 120001, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    2. Masahiko Aoki, 2011. "The Five-Phases of Economic Development and Institutional Evolution in China and Japan," Development Economics Working Papers 23196, East Asian Bureau of Economic Research.
    3. Deakin, Simon, 2013. "The legal theory of finance: Implications for methodology and empirical research," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 338-342.
    4. Aoki, Masahiko, 2012. "The Five-Phases of Economic Development and Institutional Evolution in China and Japan," ADBI Working Papers 340, Asian Development Bank Institute.

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