Non-Spontaneous Evolution of Private Legal Systems

Amitai Aviram

University of Illinois College of Law

George Mason Law & Economics Research Paper No. 03-14

Scholarship on private legal systems (PLS) explains the evolution of norms created and enforced by PLSs, but rarely addresses the evolution of institutions that form PLSs. Such institutions are assumed to form spontaneously (unless suppressed by law) when law is either unresponsive or incapable of directing behavior in welfare-maximizing manners.

But, as this paper demonstrates, PLSs typically cannot form spontaneously. Newly formed PLSs cannot enforce cooperation since the effectiveness of mechanisms used to secure this cooperation (e.g., the threat of exclusion) depends on the PLS's ability to confer benefits to its members, and newly formed PLSs do not yet confer such benefits.

Successful PLSs bypass this barrier by building on extant foundations - preexisting institutions that already benefit members, typically through functions requiring less costly enforcement. The threat of losing preexisting benefits disciplines members to abide by the PLSs' rules, which in turn allows the PLSs to regulate behavior. This pattern indicates that rather than developing spontaneously, PLSs develop in phases, initially facilitating activities that are unrelated to regulating behavior and incur lower enforcement costs, the provision of which enables the PLS to regulate behavior in the second stage.

Note: A newer version of this paper, titled "The Paradox of Spontaneous Formation of Private Legal Systems," is available for download at http://ssrn.com/abstract=421500.

JEL Classification: D23, K42, L14

Not Available For Download

Date posted: March 31, 2003  

Suggested Citation

Aviram, Amitai, Non-Spontaneous Evolution of Private Legal Systems. George Mason Law & Economics Research Paper No. 03-14. Available at SSRN: https://ssrn.com/abstract=391780

Contact Information

Amitai Aviram (Contact Author)
University of Illinois College of Law ( email )
504 E. Pennsylvania Avenue
Champaign, IL 61820
United States

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