Economic Theories on Law and Technology - Dictionary of Arguments
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Law and Technology/Economic theories/Wangenheim: Insights from joining the demand and supply forces driving the evolution of the law are much greater, however, if one takes into account that evolving law not only alters the constraints of behavior, but also channels innovation (Witt,1987)(1)and affects the individuals' interests in changing the law.
Feedback loops: With such feedback loops, the evolution of law may lose its clear direction beyond what Cooter and Kornhauser (1980)(2) and Whitman (2000)(3) have attributed to stochasticity in legal evolution. Interestingly, none of the few authors who have attempted to deal with such feedback loops have studied the degree of efficiency as evolving property of the law, but rather the degree to which the law regulates and hinders innovation or fights discrimination. Lee (1991)(4), Woeckener (1993)(5), and Wangenheim (1993(6), 1995(7)) study the evolution of how much the law regulates and how this interacts with the evolution of the innovativeness of entrepreneurs.
Lee: Lee's approach is very much in the tradition of the standard Lotka-Volterra model and results in a unique stable equilibrium of the co-evolution of regulation and innovativeness. To reach this stability, Lee has to assume that competing entrepreneurs hamper each other's innovativeness - an assumption that is in stark contrast to usual ideas about competition and entrepreneurial innovativeness.
Woeckener: Woeckener gives up this restriction and in consequence finds that the equilibrium need not be unique nor stable. Besides path dependencies resulting from multiple equilibria, attracting limit cycles of oscillating degrees of regulation and innovativeness may emerge from his model. Wangenheim shows an even richer set of possible attractors.
Both Woeckener and Wangenheim rely on a micro-foundation of their macroscopic equations of motion.
Wangenheim: However, Wangenheim's model refers more to the demand and supply side approaches to legal evolution discussed above than does Woeckener, who exclusively relies on models from political economy.
Efficiency: (…) further research should focus on efficiency as the evolving aspect of law to complement the degree of regulation. Obviously, when law induces technological change, the concept of efficiency has to be adapted, since static efficiency changes when technology changes. Only with such a dynamic concept of efficiency would it be possible to use the evolutionary models already described to study the evolutionary interaction between law and technology. Based on such co-evolutionary models, it might be possible to find a new comparison of the relative efficiency of common and civil law, perhaps building on Georgakopoulos's (1997)(8) model with its exogenously given change of what is efficient.
Models: To be clear, we do not need econometric studies of how efficient the law currently is or was at some given point in time but studies of the change of law, its determinants and its effects. Three examples of such studies are the one by Pistor et al. (2003)(9), who study the change of corporate law; Eckardt (2001)(10), who gives an overview on how German tort law, in particular accident law, co-evolved with various technologies; and Khan (2004)(11), who undertakes a similar endeavor for American patent and copyright law interacting with the evolution of transportation industry, early telecommunication (telegraphy), and medical technologies.
1. Witt, U. (1987). "How Transaction Rights Are Shaped to Channel Innovativeness." Journal of Institutional and Theoretical Economics 143: 180-195.
2. Cooter, R. D. and L. Kornhauser (1980). "Can Litigation Improve the Law without the Help of Judges?" Journal of Legal Studies 9: 139—163.
3. Whitman, D. G. (2000). "Evolution of The Common Law and the Emergence of Compromise." Journal of Legal Studies 29: 753-781.
4. Lee, L. W. (1991). "Entrepreneurship and Evolution: Dynamics and Political Economy."
Journal of Evolutionary Economics 1: 219-235.
5. Woeckener, B. (1993). "Innovations, Externalities and the State: A Synergetic Approach."
Journal of Evolutionary Economics 3:225-248.
6. Wangenheim, G. v. (1993). "The Evolution of Judge-Made Law." International Review of Law and Economics 13: 381-411.
7. Wangenheim, G. v. (1995). Die Evolution von Recht. Tübingen: Mohr.
8. Georgakopoulos, N. L. (1997). "Predictability and Legal Evolution." International Review of
Law and Economics 17:475-489.
9. Pistor, K., Y. Keinan, J. Kleinheisterkamp, and M. D. West (2003). "Innovation in Corporate
Law." Journal of Comparative Economics 31:676-694.
10. Eckardt, M. (2001). Technischer Wandel und Rechtsrevolution. Tübingen: Mohr.
11. Khan, B. Z. (2004). "Technological Innovations and Endogenous Changes in U.S. Legal Institutions, 1790-1920." NBER Working Paper 10346.
Wangenheim, Georg von. „Evolutionary Law and Economics.” In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University Press_____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.
Francesco Parisi (Ed)
The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017