John R. Commons (1862-1945)

Warren J. Samuels

John R. Commons was a historian and theoretician of the economic system in general and of capitalism in particular. The core of his legal-economic theory was presented in the title of one of his major works, Legal Foundations of Capitalism (1924).

Commons derived his theoretical insights from his practical, historical and empirical studies, particularly in the field of labour relations and in various areas of social reform. He drew insight not only from economics but also from the fields of political science, law, sociology and history. A principal advisor and architect of the Wisconsin progressive movement under Robert M. La Follette, Commons was active as an advisor to both state and federal governments. He was instrumental in drafting landmark legislation in the fields of industrial relations, civil service, public utility regulation, work­men’s compensation and unemployment insurance.

In the Legal Foundations, Commons provides a theory of the origins and foundations - the emergence and evolution - of capitalism. The analysis is in part historical in character and relies on empirical legal history and a system of legal terminology for its materials. The legal history is combined with theories of social control, social change and conflict resolution; theories of systemic and institutional organization; a theory of markets, especially of the institutions which form and operate through them; a particular legal-eco­nomic model of interpersonal relationships; and a theory of behaviour. For Commons, the law is both influenced by practice and channels economic organization and practice, accomplishing the latter by effectively choosing between alternative customs or modes of organization and practice. The keys for Commons are judicial determinations of public purpose in choosing be­tween parties to litigation, as a mode of transforming property and liberty and forming the legal bases of transactions and going concerns through adopting and changing the working rules.

Commons makes two overriding points with regard to government, points which he considers historically empirically demonstrated, given that they must be comprehended within the larger model of the legal-economic nexus.

The second point is that, given the fundamental systemic role of govern­ment, the critical question of policy is decidedly not government versus no government, or minimal government, but legal change of law, which is to say, legal change of the interests protected by law. Commons insists that there is (or if there is not yet, there will be) a law(s) pertaining to all economic relationships and phenomena, such that proposals for policy overwhelmingly represent legal change of law and not the introduction of law into a situation or system from which it hitherto has been absent.

Commons emphasizes the importance of the working rules which appor­tion opportunity and regulate interpersonal relationships: for example, access to and exercise of power. He argues that the most fundamental values and value decisions are not those with regard to the prices of commodities. They are the valuations ensconced within working rules which represent choices between alternative interests and between alternative organizational and power structures. The Legal Foundations contains an enormous amount of material illustrating how governments, the courts in particular, have made decisions about interests, relations and organizational structures, often through the reformulation of the concepts of property and liberty. He subsequently de­voted a great deal of effort to producing a theory of ‘reasonable value’, to a significant extent using the same materials. He identifies the valuation pro­cess undertaken by government in general and by the judiciary in particular through which changing values are newly embodied in the working rules as part of the central process of the legal foundations of capitalism, a historical process of social (re)construction.

Commons adopts a social constructionist approach to the legal-economic nexus. He argues one principal and four correlative points. The principal point is that both the polity and the economy are neither given nor transcen­dental to mankind but are worked out through human action. Both the polity and the economy are artifacts and therefore the product of human social construction. The first correlative point is that the social construction has been a continuous process; it is a historical process of continual, and continu­ing, reconstruction. The second point comprises a rejection of given undifferentiated transcendent metaphysical absolutes, such as property, free­dom, the economy, capitalism, and so on. The third point is his emphasis on the story residing in the details. Capitalism as it is at present constituted exists in the form generated by the details of human individual and collective action, especially the cumulative product of court decisions and legislation.

These views of Commons are evident in a famous statement in the Legal Foundations in which he refers to a certain neglect of the role of the common law in choosing between and standardizing the customs of people that he considered so central to the genesis and evolution of capitalism:

This oversight of the Physiocrats, of Adam Smith and the classical economists, is explicable in the fact that what they mistook for the order of nature or divine providence was merely the common law silently growing up around them in the decisions of judges who were quietly selecting and standardizing the good cus­toms of the neighborhood and rejecting the bad practices that did not conform to the accepted rules of reason. Legislatures and monarchies are dramatic, arbitrary and artificial; courts are commonplace and natural. (Commons, 1924, pp. 241-2)

Commons was interested in government and in the interrelations between nominally legal and economic processes and activities as a problem in its own right. But he also had a normative objective: to make an intellectual case for the recognition of labour interests alongside interests historically designated ‘prop­erty’. He believed that capitalism, in succeeding feudalism, represented not just a transformation of the economic system but an extension of the range of interests given significant legal protection.

He was motivated by the desire to show that, just as land and commodity markets have undergone enormous transformation in their legal foundations, so too have labour markets and, moreover, that it is legitimate to consider modern developments as part of that process. The emergence of the labour market was due to the recognition by law of the right of the worker to his own labour. But labour is bought and sold in the market under conditions import­antly established by law, that is, the legal foundations of the labour market. And here Commons points to the differential treatment by the courts in the late nineteenth century of corporations and unions. Each represents collective action, but one is abetted and the other hindered by the courts. This is all a matter of legal choice, says Commons, just as it was in the evolution of the corporation itself. The courts have simply chosen the customs of business over those of workers, at least to that date. Law is presented as the result of a choice of customs.

Commons’s social constructivism has two elements in it. One comprises the non-deliberative elements of habit and custom, such that components of the legal foundations of capitalism are reinforced by use. The other is the exercise of deliberative judgment by individual economic actors, including, and analytically most critically, government in the form of legislatures, courts and administrative agencies. The social construction and reconstruction of the economy is the continuing result of both types of behaviour. For Com­mons the economic system has been transformed in a manner consistent with the principle of unintended and unforeseen consequences, though in a com­plex and non-ideological manner. Individual buyers and sellers and individual litigators were presumably seeking only their own interests (as they have come to know their interests) throughout the centuries during which capital­ism was formed and evolved. But actions and decisions were taken which cumulatively resulted in the transformation of late feudalism into capitalism and eventually in the transformation of capitalism itself. Part of this complex process undoubtedly included the behaviour and decisions of various actors, especially legislators and judges, motivated by conceptions of the kind of economic system they wanted, at least in so far as the matter arose in connec­tion with the legislation or case currently under consideration. Images of the economic system entered into their decisions both consciously and uncon­sciously, deliberatively and non-deliberatively. Expressed differently, the forces of social construction generated an ‘order’ through both ‘spontaneous’ or organic modes and deliberative assessment of existing arrangements by legis­latures and courts.

Commons adopted a social constructivist and not a representational con­ception of language. ‘Words, prices and numbers,’ he wrote, ‘are nominal and not real. They are signs and symbols needed for the operation of the working rules. Yet each is the only effective means by which human beings can deal with each other securely and accurately with regard to the things that are real. But each may be insecure and inaccurate’ (ibid., p. 9). Certain words embody and give effect to theories - for example, of property, liberty and value - which are sometimes erected into metaphysical and ontological absolutes but, however held, serve as the basis for the formulation and reformulation of rights, duties and so on. It is out of these processes that both the economic system known as capitalism emerged and evolved and the words were given ascriptive meaning.

Commons analysed legal discourse: how words, as artifacts, encapsulate changing interpretations of experience and of values - and have done so as part of the transformation from feudal to capitalist society. Changes in legal semantics thus incorporate more or less subtle but typically important changes in law and therefore in relative rights, opportunities, exposures and immunities. Commons also indicates the reification and privileging of certain specifications of concepts like private property as natural and therefore antecedent to and independent of government, in contrast to the actual process of the human social construction of property as an institution; the selective privilegings function as part of that process. He principally emphasizes the growth of the legal definition of property to include incorporeal and intangible property, the transformation of the meaning of property from use-value and exchange­value (and the correlative change from an emphasis on one’s own use to others’ potential use and the role of withholding). Changes in the legal definition of property were a function of changes in judicial theories of property and liberty, all involving words with socioeconomic consequences.

Commons is thus a social constructivist with regard to jurisprudence as well as language, that is, the language and meanings of law. Changes in definition are in part the means whereby both legislature and, especially, the courts can legislate; such changes in definition, Commons writes, ‘are of course not arbitrary. They spring from new conditions. Yet they are discret­ionary’ (ibid., p. 356). Legal change for Commons is more than a matter of changing conditions; it is also a matter of changed perceptions and evalua­tions of experience, for example, changes in which/whose customs the courts will embody in law and enforce on others, and so on. Changing definitions can arise from new conditions but conditions can be variably experienced and evaluated, depending upon purposes and values, so that even new conditions can be variably interpreted and lead to different changes in language or to no change. All this is central to the social reconstruction of reality.

Commons’s general model has several elements, which may be identified and summarized as follows:

1. a legal-economic nexus in which nominally economic and nominally legal (political, governmental) activities are not only mutually determina­tive and interactive but, especially, coevolve from a common set of sources;

2. a model of economic relationships grounded in legal relationships, ultimately in terms of rights, powers, duties, opportunities, liabilities, exposures and immunities;

3. these relationships are the foundation, the changing foundation, of trans­actions and of going concerns, the former being for Commons the fundamental unit of analysis and the latter the embodiment of organiz­ational, structural and change variables;

4. conflicts between claims of relative rights and of power and immunity, and so on, historically have involved an inexorable necessity of choice, typically by courts, of which/whose custom will prevail;

5. also inexorably involved are determinations of public purpose, on the basis of which effective choices between conflicting claims of right and so on are made;

6. determinations of public purpose are embodied in the working rules of law, which, among other things, govern the distribution, access to, and use of power among economic actors;

7. the working rules apportion power within the nominally private sphere, within the nominally public or governmental sphere, and between the two spheres;

8. other forms of working rules exist, including those formulated within organizations, such as businesses, albeit always within the zone of authorized discretion permitted by the external working rules, espe­cially those of law;

9. combining recognition of both the variety of forms of working rules and the diffusion of power within the economy, the economy is seen as a system of power and therefore of combined private and public gov­ernance, each selectively perceived and each given its selective discursive and symbolic (mythic) expression and rationalization, but together con­stituting the total legal-economic nexus;

10. historical change within this system is brought about or driven by changing practices, changing beliefs, changing values and so on, espec­ially as ensconced within changing theories of law, property and liberty;

11. the crux of historical change is the legal change of law, that is, the legal change of the interests given legal definition and protection, epitomized in the historical transformation of property.

A central thread of historical change for Commons was the transforma­tions and inversions of legal/political organization and concepts. What had originally been monarchical prerogative became transformed and constrained during the rise of republican, or representative, government; from autocratic monarchy came the modern state. What had initially been legal privileges of the aristocracy under Magna Carta were later reinterpreted, selectively, into common rights. Correlative with the transformation of government from feudal to modern was the transformation of the economy from feudal to commercial/capitalist.

What had been the combination of ‘property’ and sovereignty that consti­tuted feudalism - lords and their subjects - now became free citizens and their government. Commons recounts the initial predominance of more or less absolute monarchies with their royal prerogatives; the emergence of royal courts and courts at the levels of the lower aristocracy; conflicts be­tween monarch and lesser nobility, between monarch and courts, and between monarchical and other courts; and the growth of the common law of free men arising from the use of their customs and beliefs in the resolution of local inter-party conflicts. This historical story can be understood as several stages of the Anglo-American economic system represented by different systems of law and government. But economy and polity coevolve: the changing system and structure of government led to systemic and structural economic change, and changing economic change led to changing political change.

Commons portrays a broad, complex and deep series of transformations of English society and does so in terms of the transformation of property through the emergence of several bargains. One was the rent bargain, the origin of modern private property in land, with an enormous social and economic diminution of the rights of feudal landlords correlative with the growth of fee simple property ownership of land. Here the landlords kept their physical land but with greatly reduced social and economic power, or rights.

Another was the price bargain, with the monarchy and feudal lords retain­ing their physical landed property (diminished as just described) but now, along with the guilds, having relatively negligible control over private eco­nomic activity in an economy of free people and not subjects and serfs, and so on. In a correlative bargain, the landed aristocracy, including the monarch, would retain their physical land but lose much of their control over govern­ment and its policy. Governments were increasingly in the hands of both a parliament (representative government), in whose operation the business or middle class predominated, and courts whose judges were increasingly amen­able to recognizing and protecting the interests of the middle class.

Eventually, the interests of the landed and non-landed (capitalist) property owners were challenged by the working class, and another bargain was worked out: the owners of property retained their physical property and many of the rights associated therewith, but now had, through the extension of the fran­chise and the resulting greater responsiveness of elected politicians to worker interests, increasingly to share the goals of government policy with a wider range of interests. One result was the formation of what has been called the welfare state, meaning thereby the passage of legislation and programmes promotive of the interests of workers and others in a manner comparable in substance, though not in name, to the promotion through property rights of the interests of those who came to own property. Another result was the growth of a system of industrial governance, centring on the rise and increas­ing legal recognition of labour unions. All of this took centuries, the negotiation, as it were, over the welfare state and labour unions continuing to the present day.

Commons believed that modern government was a ‘collective bargaining state’. Government was the arena in which these bargains (solutions) were worked out. Commons contrasts two theories of law, one maintaining that law is made by the command of a superior, the other holding that law is found in the customs of the people. His analysis effectively rejects the con­ventional juxtaposition. He argues that courts make law by choosing between the customs of different groups of people and in that way ‘reconstruct soci­ety’ (ibid., p. 299). Customs are for Commons the raw material out of which justice is constructed. But customs differ, customs change, customs are good and bad, and customs conflict. They are uncertain, complex, contradictory, and confusing. A choice must be made. Law is the result of a choice between customs, ergo a choice between different psychologies and between different interests.

Bibliography

Commons, John R. (1896), ‘Political economy and law’, The Kingdom (Minneapolis), 24 January, 225.

Commons, John R. (1924), Legal Foundations of Capitalism, New York: Macmillan; reissued, New Brunswick, NJ: Transaction Publishers, 1995.

Commons, John R. (1925), ‘Law and economics’, Yale Law Journal, 34, February, 371-82.

Commons, John R. (1927), ‘Legal and economic job analysis’, Yale Law Journal, 37, Decem­ber, 139-78.

Commons, John R. (1931), ‘Institutional economics’, American Economic Review, 21, Decem­ber, 648-57.

Commons, John R. (1932), ‘The problem of correlating law, economics and ethics’, Wisconsin Law Review, 8, December, 3-26.

Commons, John R. (1936), ‘Institutional economics’, American Economic Review, Supplement, 26, March, 237-49.

Commons, John R. (1965), A Sociological View of Sovereignty, New York: Kelley.

Samuels, Warren J. (1996), ‘Reader’s guide to John R. Commons’s Legal Foundations of Capitalism’, Research in the History of Economic Thought and Methodology, Archival Sup­plement, 5, 1-61.

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