Aviram, Amitai --- "Forces Shaping the Evolution of Private Legal Systems" [2011] ELECD 244; in Zumbansen, Peer; Calliess, Gralf-Peter (eds), "Law, Economics and Evolutionary Theory" (Edward Elgar Publishing, 2011)

Book Title: Law, Economics and Evolutionary Theory

Editor(s): Zumbansen, Peer; Calliess, Gralf-Peter

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848448230

Section: Chapter 8

Section Title: Forces Shaping the Evolution of Private Legal Systems

Author(s): Aviram, Amitai

Number of pages: 19

Extract:

8. Forces shaping the evolution of private legal
systems
Amitai Aviram*

1. INTRODUCTION

In a world with no transaction costs, perfect rationality, and complete information, not
much could be gleaned from studying the evolution of private legal systems (PLSs),1
nor could one predict with any accuracy the future evolution of PLSs. In this economic
fantasy land, efficient norms are already known and recognized by all, and the PLSs'
norm enforcement costs (which are a component of the total transaction costs) are zero.
Thus, any institution ­ public or private ­ is likely to become a successful norm enforcer.



* I thank Ben Christenson and Lauren Ferrante for their diligent research assistance.
1
For the purposes of this chapter, I define a PLS as a multi-party institution that enforces
norms through the use of network effects. This distinguishes PLSs from other norm-enforcing
institutions, notably government regulation (which uses hierarchy and government's monopoly of
force), and bilateral contracts (which rely on either government enforcement, repeated play or the
exchange of collateral, but not on network effects). I prefer this definition to an alternative one that
focuses on the non-government (i.e., private) character of the institution, because the dichotomy
between public and private legal systems is not always a clear one. Some PLSs have a significant
public backing and are very similar to public legal systems. For example, the King of England
enacted in 1353 the `Statute of the Staple,' which prohibited Common Law courts from hearing
disputes arising from ...