“The Capital Code”: the marriage of law and economics
Book. Economists like to argue about the origins of capitalism, this historical period which, between the mid-seventeenthe and mid-nineteenthe century, saw the emergence in concentric circles from Amsterdam and London of a new economic, but also cultural and institutional system, destined to dominate the planet. Some like to explain this “great difference” (Kenneth Pomeranz) with the rest of the world, becalmed in low growth before being colonized, by the equation of ” production factors “, mixing in arithmetic proportions the financial investment of merchants, the work of peasants and craftsmen and the technical innovations of scientists. Others say “institutionalists” (John R. Commons), underline the decisive role of political institutions, the political fragmentation of Europe between rival states offering here an asset more than a handicap in the face of the centralized despotism of empires. Still others insist on the “soft power” of a cultural and anthropological revolution (Max Weber, Deirdre McCloskey), which shakes the shackles of religions and the feudal hierarchy to promote technical and intellectual innovation, individual freedom and the quest for knowledge.
But all agree on the importance of law, a legacy of Roman law taken up by humanists, to regulate by law and judicial authorities the relationship between public power and private agents, but also between private agents, fixing commitments, responsibilities and guarantees. It is in fact the contract that makes it possible to introduce the dimension of time into the economy and thus to bring out the essence of capitalism: investing, innovating and undertaking today so that it pays more tomorrow.
“The Dark Side of the Force”
In Western and liberal literature, this role of the legal is seen as positive. Because it is the law, the judge and the lawyer who allow individuals to defend themselves and to persevere against the arbitrariness of more powerful than them by wealth or authority. In this, the rise of capitalism is readily associated with the extension of the notions of universality and equal rights. The political assemblies of the 19th centurye century are populated by lawyers, jurists and economists displaying liberal convictions against religion and despotism.
The originality of the book The Capital Code, by Katharina Pistor, a law professor at Columbia University (New York), is to tell the same story, but by focusing on describing the other side of the coin, “The Dark Side of the Force” law, to explain the genesis of what economists modestly call the “negative externalities” of capitalism: explosion of inequalities, repeated crises and wars, grabbing and destruction of natural resources, existential threat to the balance of life and the planet.
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