Loria’s ‘economic theory of the law’

Loria believes that the economic theory of the law means the study, from one point of view, of the economic structure of legal sanctions, and from the other, of the economic nature of legal change.

The point of departure in his investigation is represented by the definition of the law as a legal sanction in accordance with the economic relationships of society. In this sense, Loria’s theory appears to adopt a concept of sanc­tion, similar to that of modern law and economics, whereby legal rules are understood as a system of imposed prices on the conduct of various subjects of the law. In particular,

Whoever examines the law in the limited form of the economy, or in the associ­ation of free labour, would see that it would take into account a whole range of norms, ensuring to single producers the peaceful enjoyment of the results of their labour and of their accumulation of wealth, and that these prescriptions would be spontaneously respected by everyone else because they essentially conform to the real self-interests of each one.

Loria later contrasts the ‘free association of labour’ with the ‘compulsive association of labour’. In the first case, in a society where producers, who have equal bargaining power, spontaneously associate, whoever dares to take opportunistic advantage of the other’s right will provoke the other individual to break the association, declining at once the productivity and benefits of the association with the opportunist. Therefore, the antithesis of this self-interest (mutual benefit) is spontaneously abandoned. Under such conditions, the law has no other task than to identify the individual interests of each associate and to impose them jointly on all the associates.

This state of affairs is contrasted to the case of compulsive relationships. Here, there is an evident and necessary distinction between moral behaviour and the law. Ironically, in a command legal system detached from the eco­nomic order, the violation of the law may increase and improve the wealth and destiny of the subjects of the law. In the general case, however, the offender of the law improves his/her well-being at the expense of another’s: ‘Opportunism pushes men to reciprocal breach, or antisocial actions’. Conse­quently, ‘the law can no longer limit itself to a theoretical affirmation of individual economic interests, but must be armed with a severe sanction for opportunistic behaviour’. Considering the previously explained egoistical interests of men, it is evident that the difference between the law and moral behaviour is that the latter is unable to guarantee a social order of things; therefore, it is helped by the workings of the law. This touches the heart of the matter through the identification of an effective sanction against the egoistical behaviour. Selfish behaviour differs from moral behaviour, for the latter discredits the former, making its omission look like egotism. In sum­mary, the right of coercive institutions is a necessary product of the conflicting interest of self-interested individuals. This is why people connected by their reciprocal self-interest will coordinate their actions in the pursuit of a com­mon utility. Further, it is the completion and integration of the coactive moral behaviour where it is insufficiently manifested to its scope. This insufficient scope compared to the coactive moral behaviour represents a more complex and articulated organism.

It is often stated that the law represents a society-approved sanction against individual action. Differences in creeds and social beliefs, however, may ultimately lead to a coherent synthesis of collective wants.

[The] entire history of the law shows us how law in those societies is far from being the product of abstract reason, or the result of a national conscience, or the emanation of race. Economic relations are a constant, migrating from nation to nation, shifting from one century to another, from one phase of history to another. Yet if it is in doubt that the law transforms itself with the mutation of the economic relations, it is also true that this transformation does not always happen promptly.

At this point a painful contrast appears that is sometimes fixed between the new economic relationships and the antiquated legal institutions. If today we find the law crystallized or almost paralysed, this, in Loria’s view, is because even the law is not attentive enough to the underlying economic reality; nor is it sufficiently tractible. In fact, while new conditions in rural industry require more elastic agricultural contracts and more benefits to the producer, the law is still shrouded by the dark funeral cape of Roman formalism.

According to Loria, further specification is implied by the relationship between economics and law, and the transformation of the latter to the former.

In particular, the derivation of the law from economic reality does not preempt the idea that once the economy is developed, it cannot proceed on its own. Thus, the law cannot be autonomous, but it becomes part of the political economy. It follows that during its own autonomous development the law becomes a powerful factor in the entire social constitution; thus, it is effic­ient, albeit a modification of the economic relationship. Therefore,

[T]he economic theory of society never negates, nor does it soften, the incontest­able and powerful reactions of the legal factor to the economic factor.

Based on a similar consideration, Loria radically concludes that, ‘each person examining social relationships will at some point convince himself of the influence of the legal fact that modifies the economic fact. It is not merely the last thing, but it is an influence of the economic fact that modifies itself’.

Thus, the ‘solemn’ affirmations of Rudolf Stammler’s doctrine (contained in the work entitled Wirtschaft und Recht, Leipzig, 1896), seem, in the eyes of Loria, ‘arbitrary and indeterminable’ and, therefore, fundamentally refut­able. Stammler, in particular, thought that the origins of economic relations arise from legal derivation, that they cannot be conceived except generally through a view of a specific legal environment under the direction of the law. A similar irrefutable proposition is invalid in its inverted meaning: according to Stammler, the economy cannot ever influence the law. Thus, the law is not analysed as the study of facts or concrete phenomena, but as the theory of the phenomena. Accordingly, it is an extended dogmatism by its own relative and positivistic dimension. The general theory of the law would be validated in every place and time independently of the economic order. Loria considers this prospect in relation to its abstract dogmatism, considering the study of the fact in its historical context, valid for every type of scientific approach. In this sense, the dispositions of private property, the protection of property, and the termination of the legal condition of an heir, have no reason to exist without reference to a specific case.

Stammler is careful even when he specifies that the relation between law and economics is not due to cause and effect but to form and substance. The law would be the form of the economy, where the economy represents the substance.

What is not convincing about Stammler’s work is highlighted in Loria’s works by his consideration of the law attached to the will of human beings. After all, will is intended not as a purely arbitrary, nor as a subjective egoism, but rather as ‘reasonable, rational, and partially circumscribed in the social environment. Individuals will point toward the high idealization of a commu­nity of free men who are freely conscious, and they tend to exist without ever completely fulfilling their higher form’. This expression represents a ‘pure indeterminism’ that reduces the indeterminate will of men to a supreme factor of the legal institutions: that is, the whole of social life. Loria found reassur­ance concerning the validity of the origin of the law from the economic system, in view of the lack of reliability of the opposing theories. This economic theory of the law had already been sensed by Plato (in the Repub­lic, 1, 9) and by Cesare Beccaria in, Dei delitti e delle pene (On crimes and punishments) (1764), affirming that ‘most of the laws are nothing but privi­leges, a tribute by all for the use of the few’.