Legal Ground Rules in Coordinated and Liberal Market Economies

Authors

Katharina Pistor, Columbia Law SchoolFollow

Publication Date

2006

Abstract

This chapter seeks to explain the affinity between the nature of economic systems: coordinated market economies (CMEs) and liberal market economies (LMEs) on the one hand, and legal origin (civil vs common law systems) on the other. It starts with the simple observation that LMEs tend to be common law jurisdictions, and CMEs civil law jurisdictions. It proposes that the affinity between economic and legal system offers important insights into the foundations of different types of market economies and, in particular, differences in the scope of the state vs the powers of the individual. The main argument is that the legal system serves as a coordination device for social preferences. At the most basic level, these social preferences are reflected in the allocation of rights and responsibilities either to individuals or away from them: to the collective or the state. These social preferences are reflected in legal ground rules stipulating who has the power to determine the meaning and contents of private contracts and who may seek outside help – judicial recourse – to settle disputes: the individual(s) or the collective.

Disciplines

Banking and Finance Law | Business Organizations Law | International Economics | Law | Law and Economics

Recommended Citation

Katharina Pistor, Legal Ground Rules in Coordinated and Liberal Market Economies, Corporate Governance in Context: Corporations, States, and Markets in Europe, Japan, and the US, Klaus J. Hopt, Eddy Wymeersch, Hideki Kanda & Harald Baum (Eds.), Oxford University Press (2006).
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/2445