8/3/2019 114 BAB 4

1/3

114 BAB 4

Change and the ongoing process of legal-economic reconstruction through the

nexus process thus makes necessary an evolutionary-historical approach that accounts

for the array of factors and forces promoting both continuity and change over time.

Mutual Interdependence, Conflict,

and the Problem of Order.

The Institutionalists view the legal - economic system as a system of manual

interdependence rather than atomistic independence. the economiy, says Schmid

(1989, p. 59), is "a universe of human relations," not merely "a universe of

commodities," and within this worls each individual has scarcity relationships with

position off of contract curvers to positions on contract curves in the process of

exhausting gains from trade, the Institutionalist approach place strong emhasis on (1)

who gets to play, (2) where one starts in the game, and (3) the strategic behavior (i.e.,

the conscious, calculated choices) of participants that frame the position, role, and

status of each individual.

Given the importance of human interdependence and the emphasis on who

plays and what are the starting points within the Institutionalist approach, the

emphasis of this approach is on conflict rather than harmony, where The role of the

legal system, including both common and constitutional law, is to provide a

framework or process for conflict resolution and the development of legal rights

(Samuel and Mercuro, 1979, p.166). The fundamental problem here is that of order,

which Samuels 91972a, p. 584) defines as the reconciling of freedom and control, or

autonomy and coordination including hierarchy and equality, with continuity and

change. The ultimate meaning of the legal and economic process, says Samuels

(1971, p. 449), is in terms of their functioning toward resolving the problem (s) of

order. The existence of conflicting interest necessitates both and a method (or

methods) for determining how these conflicts are to be resolved.

Thus, society is recognized, at leats in part, as a cooperative venture for

mutual advantage where there is both an identity and conflict of interests in ongoing

human relations. Within this system of mutual interdependence, societal institutions,

including the lel system, both enhance the scope of cooperative endeavors and

8/3/2019 114 BAB 4

2/3

channel political legal economic conflict, of whose interests government will give

effect through law and otherwise, is the resolution of the problem of order in society

a working out of a societal structure that promotes coherence, security, and

orderliness in human relations. Indeed, the manner by which a society comes to

channel conflict says much about its ultimate character.

RIGHTS, POWER, AND GOVERNMENT

From the institutional perspective, law is fundamentally a matter of right

creation and re-creation. Consistent with the positive, desriptive nature of this

approach, Institutionalists are concerned with the rights (re) creation process and the

impact of this process on legal economic decsion making and activity. To

understand the importance of rights from the institutional perspective, it is firs

necessary to understand the Institutionalist conception of the determination of the

individual choice process and the activities open to individuals.

Individual decision making is a function of ones opportunity set, which

consists of the available alternatives for action or choice , each with a relative

opportunity cost, which are open to the individual (Samuels, 1974, p. 120). However,

these opportunity sets are not without limit in their scope; rather, reflecting human

interdepence and scarcity, each individuals opportunity set is constrained, and indeed

shaped, by the opportunity sets of others in society. Each individual desires to make

choices from a set that is as uncostrained as possible, which, in turn, means that

individuals will wish to control the choices, and hence opportunity sets, of others who

may constrain their choice. The exten of each individuals ability to determine his or

her own choices and to influence the opprtunity sets, and hence choices, of others is

the outcome of a process ofmanual coercion, where the ability to coerce is simply the

ability of A to impact Bs opportunity set without Bs consent. An individuals

capacity to exercise coercion is, in turn, a function of that individuals power, defined

as the means or capacity with which to exercise choice (Samuels, 1972b, p. 65), and

this power is relative to the power of others. Thus, The opportuity set of the

individual, within which he attempts a constrained maximizing equilibrium, is a

functon of the total structure of mutual coercion, grounded upon relative power

(Samuel, 1972b, p. 65). Moreover, power is also a dependent variable in this process,

being a function of the choices made from opportunity sets that exist and evolve

through time (Samuels, 1972b, p. 66).

8/3/2019 114 BAB 4

3/3

The origin of rights in the resolution of conflict of interest brings to the fore

the point that rights have a dual nature the opportinity set enhancement of those

who have rights and the opportunity set restriction of those who are exposes to them

(Samuels, 1974, p. 122). Virtually every legal change imposes both benefits and costs,

the enhancement of some opportunity sets and the simultaneous restiction of others.

Externalities are thus ubiquitous and reciprocal - any (re) definition, (re) allocation,

or change in the ecternal ity remains; it is merely shifted. In institutional law and

economics, system of property, tort, and contract law, then do not providesolutions to

situations of externality, but rather only resolutions, as externalities, and hence benefit

and harm, are channel in a particular direction through the legal delimitation of rights.

Government is seen