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Corporate Governance in ContextCorporations, States, and Markets in Europe, Japan, and the US$
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Klaus J. Hopt, Eddy Wymeersch, Hideki Kanda, and Harald Baum

Print publication date: 2005

Print ISBN-13: 9780199290703

Published to Oxford Scholarship Online: March 2012

DOI: 10.1093/acprof:oso/9780199290703.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 29 October 2020

Legal Ground Rules in Coordinated and Liberal Market Economies

Legal Ground Rules in Coordinated and Liberal Market Economies

(p.248) (p.249) Legal Ground Rules in Coordinated and Liberal Market Economies
Corporate Governance in Context

Katharina Pistor

Oxford University Press

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.

Keywords:   economic systems, market economies, common law, civil law, social preferences

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