List’s relation to law and economics

The prime instrument in List’s strategy was the legal system. Changed legal regulations were to promote social progress, however much they had to be fought through in political and bureaucratic battles.

Educated in law and having practised within the administrative and parliamentary system, this was logical to him. List’s ideas, in spite of their close affinity to the law and economics approach, have nevertheless been barely noticed among students of law and economics. I shall show that his insights qualify List as an important forefather of the law and economics profession. List argues against a French colleague of Smith, J.B. Say:

The prosperity of a nation is not, as Say believes, greater in the proportion in which it has amassed more wealth (i.e. values of exchange), but in the proportion in which it has more developed its powers of production. Although laws and public institutions do not produce immediate values, they nevertheless produce productive powers, and Say is mistaken if he maintains that nations have been enabled to become wealthy under all forms of government, and that by means of laws no wealth can be created. The foreign trade of a nation must not be estimated in the way in which individual merchants judge it, solely and only according to the theory of values (i.e. by regarding merely the gain at any particular moment of some material advantage); the nation is bound to keep steadily in view all these conditions on which its present and future existence, prosperity, and power depend.

The nation must sacrifice and give up a measure of material property in order to gain culture, skill and powers of united production; it must sacrifice some present advantages in order to insure to itself future ones. (List, 1841, p. 144)

The relation between law and economics is the practical core of his world of ideas and economic efficiency in the widest sense is the goal for his efforts to reform the legal system.

He says, ‘Every law, every public regulation has a strengthening or weakening effect on production or on consumption or on the productive forces’ (ibid., p. 307). Nevertheless, the ultimate goal was of an immaterial and moral nature, closely related to law as well. The prime instrument and crucial tool and lever of his plans for a more humane and efficient economic system was, in fact, law and regulation. He preferred, in many cases, to give law precedence over regulation because of the restrictive effect law has on potential excesses of the bureaucracy. For the same reason, he worked in favour of the jury system, ‘one jewel out of the treasure house of freedom’ (ibid., p. 50) in order to correct the arbitrariness and inefficiency of the bureaucracy (as was Gottfried Leibniz’s leading idea in his work on legal issues: Anners, 1983, p. 211).

List was educated and practised primarily within the legal system (as a junior and later senior tax clerk, as well as a student and, later, professor) and within law making (as a member of parliament). He was throughout his life devoted to the issue of arranging, first of all, the national and international legal systems so as to serve economic efficiency, in the interest of the common good. He writes:

Thus the question as to whether, and how, the various nations can be brought into one united federation, and how the decisions of law can be invoked in the place of military force to determine the differences which arise between independent nations, has to be solved concurrently with the question how universal free trade can be established in the place of separate national commercial systems. (List, 1841, p. 114)

National and international legal arrangements were also the main preoccupation of forerunners in Germany, like Nicholas Cusa, Leibniz and Wolff.¹ Legal reform was the essence of List’s reform plans as a local civil servant in Wurttemberg and the essence of his reform plans as a journalist, consultant and politician for a German, European and global legal and economic system.

For List there was not a great conflict between justice and efficiency since justice would serve efficiency, and vice versa. He argued that injustice was a major reason for existing economic problems, for instance regarding slavery in the southern states of the United States. In fact, looking at much of List’s agenda in opposition to the bureaucracy - freedom of expression, accountability, trial by jury - he might be mistaken for a neoliberal. His opinions on the spiritual origin and character of wealth and prosperity and on the corresponding need for moderate and differentiated regulation make most of the difference. Precisely because he insisted on the important role of regulation, he had all the more reason to be critical of the behaviour of the bureaucracy - like the main thrust of the Ethical-Historical School in economics, such as Max Weber. His personal experiences underline this point.

Surprisingly, it is little realized today, in the so-called ‘information age’, that List was also the prophet of the economics of communication. His strategy of furthering communication through the establishment of infrastructure in all ideal and material aspects was based on an idealistic image of Man, regarding the human spirit as the ultimate source of wealth and of power. Concerning economics of growth as well as law and economics, this gives List a lead, as he thoroughly discussed the incentive structure in many aspects, and regarded it as crucial for entrepreneurship.

<< | >>

↑

Source: Backhaus Jürgen G. (ed.). The Elgar Companion to Law And Economics. Second Edition. Edward Elgar,2005. – 777 p.2. 2005

More economic literature on Economics.Studio

List’s relation to law and economics

More on the topic List’s relation to law and economics: