Legal irrationalism
If Veblen is not remembered as a founder of ‘law and economics’, and typically he is not, this is because the concern with rational purpose was ultimately supplanted by instinct and habit as the explanatory keys to all institutional structure.
To some extent, Veblen’s concern to diminish the cognitive status of jurisprudence must reflect his deep-seated antipathy to lawyers, thanks to whose machinations his father had once been forced to forfeit his farm. But there were higher-minded causes as well, most conspicuously the anti-Utilitarian backlash in turn-of-the-century social science. Veblen absorbed this especially through his teacher, William Graham Sumner, through William James, and through his Chicago colleague Jacques Loeb. This insight, combined with Veblen’s flair for the voguish terminology of behaviourist psychology, set the stamp on his rhetoric for decades to come:For mankind as for the other higher animals, the life of the species is conditioned by the complement of instinctive proclivities and tropismatic aptitudes with which the species is typically endowed.... Human activity, in so far as it can be spoken of as conduct, can never exceed the scope of these instinctive dispositions, by initiative of which man takes action. (Veblen, 1914, p. 1)
This was of central import for legal evolution:
Any large and persistent change in the material conditions - such, e.g., as has been taking effect in the scale and methods of industry during the past one hundred years - will necessarily be followed in due course by more or less pronounced changes in the established order of human relations and principles of conduct; but it need not follow that the resulting changes in law and morals will be of such a nature as to enhance the facility of life under the new order of material conditions which has induced these changes.. any resulting revision of the principles of conduct will come in as a drift of habituation rather than a dispassionately reasoned adaptation of conduct to the circumstances of the case.
(Veblen, 1923, pp. 18-19)In sum: Veblen’s economics was heterodox, and so too was his economic analysis of law bound to be.
It is on account of this very scepticism that Veblen came to define ‘institutions’ in a fairly novel way, not as explicit rules, but rather as ‘settled habits of thought common to the generality of men’ (Veblen, 1909, p. 239). (He did, however, allow that ingrained proclivities ‘not only become a habitual matter of course, easy and obvious, but they come likewise to be sanctioned by social conventions’, Veblen, 1914, p. 7). Whereas the new institutionalism tends to construe social norms as (i) the result of rational choices, and (ii) effective by constraining rational choices in turn, the Veblenian will rejoin that norms (i) are just as likely to be the precipitates of habit or instinct, and (ii) operate largely by structuring the preferences that guide individual choice. Hence there remains a danger that old (Veblenian) institutionalists and new institutionalists will talk at crosspurposes. With that caveat in mind, let us turn to the evolutionary schema through which Veblen believed law to develop.