Competition among Institutions pp 153-175 | Cite as

Competition among Legal Institutions: Implications for the Evolution of Law

Fuller (1964, p. 106) explains that law is ‘the enterprise of subjecting human conduct to the governance of rules’; that is, law includes both rules of obligation and institutions to induce recognition of, clarify, and change those rules. The actual characteristics of rules and legal institutions depend on their purpose, however. An individual can expand wealth through productive activities, particularly when they are complemented by voluntary interactions with others, including economic interaction such as cooperative production (e.g., due to specialization and the division of labour) and trade, and legal institutions to define and support private property rights facilitate both productivity and voluntary interaction. Hayek distinguishes between the ‘order of actions’ and the ‘order of rules’ (1973, p. 98), arguing that the order of rules can emerge spontaneously, just as an order of action does. Rules and their supporting institutions evolve spontaneously because individuals discover that in their voluntary interactions the rules are co-ordinated more effectively under one system or process than under another (Benson, 1989). The relative effectiveness of rules and institutions are discovered as individuals innovate and as they observe, learn from, imitate and migrate to competitive alternatives. Some of the innovations in rules may be deliberately created by co-operating individuals facing a new situation (e.g., new contract clauses) and voluntarily adopted by others, while others evolve even more spontaneously through changes in behaviour that are observed and copied.

Legal System Dispute Resolution Repeated Game Legal Institution Legal Authority

This paper draws from a larger project on ‘The Evolution of Law’ which has been supported by the Earhart Foundation. Discussions with and comments by Randy Holcombe and Kevin Reffett led to significant improvements in the development and presentation of the arguments, as did discussant comments made by Douglas Ginsburg and participants in the Friedrich August von Hayek Symposium on ‘Competition Among Institutions’ in Freiburg, Germany, June 1–4, 1994, sponsored by the International Institute and the Walter Eucken Institut.

© Lüder Gerken 1995

There are no affiliations available

Benson B.L. (1995) Competition among Legal Institutions: Implications for the Evolution of Law. In: Gerken L. (eds) Competition among Institutions. Palgrave Macmillan, London
[null, {"document_url": "https://rd.springer.com/chapter/10.1007/9781349242627_6", "unformatted_src": "https://media.springernature.com/w306/springer-static/cover/book/978-1-349-24262-7.jpg", "src": "https://media.springernature.com/w306/springer-static/cover/book/978-1-349-24262-7.jpg"}, null]