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Legal Evolution: Integrating Economic and Systemic Approaches

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  • Deakin, S.

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.

Suggested Citation

  • Deakin, S., 2011. "Legal Evolution: Integrating Economic and Systemic Approaches," Working Papers wp424, Centre for Business Research, University of Cambridge.
  • Handle: RePEc:cbr:cbrwps:wp424
    Note: PRO-2
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    File URL: https://www.cbr.cam.ac.uk/fileadmin/user_upload/centre-for-business-research/downloads/working-papers/wp424.pdf
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    References listed on IDEAS

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    1. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    2. Aoki, Masahiko, 2010. "Corporations in Evolving Diversity: Cognition, Governance, and Institutions," OUP Catalogue, Oxford University Press, number 9780199218530.
    3. 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 171-195, March.
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    Citations

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    Cited by:

    1. Du Laing Bart & De Coninck Julie, 2011. "Introduction: Symposium on Evolutionary Approaches to (Comparative) Law: Integrating Theoretical Perspectives," Review of Law & Economics, De Gruyter, vol. 7(3), pages 653-658, December.
    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. Schmidtchen, Dieter & Kirstein, Roland, 1999. "Ordnung," CSLE Discussion Paper Series 99-10, Saarland University, CSLE - Center for the Study of Law and Economics.
      • Dieter Schmidtchen & Roland Kirstein, 2012. "Ordnung," FEMM Working Papers 120001, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    4. Ding Chen & Simon Deakin & Mathias Siems & Boya Wang, 2016. "Law, Trust & Institutional Change in China: Evidence from Qualitative Fieldwork," Working Papers wp485, Centre for Business Research, University of Cambridge.
    5. 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.
    6. Chen Ding & Deakin Simon, 2015. "On Heaven’s Lathe: State, Rule of Law, and Economic Development," The Law and Development Review, De Gruyter, vol. 8(1), pages 123-145, June.

    More about this item

    Keywords

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

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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