3 - Ghosts in the machine

Summary

One of the central points of this study is that the new science of law prefigured today's “new” institutional economics far more than the conventional wisdom allows. This chapter, however, must begin with a partial concession to that conventional wisdom. The fact is that the model of homo oeconomicus – the staple of political economy in general, and of chapter 2 in particular – was more problematic to practitioners of the new science than to their mid-twentieth-century heirs.

We have termed the scientific paradigm of the preceding chapter “normal” because it predicated a complete model of human behavior, the fulcrum of which was rational calculation in the pursuit of maximum personal net worth. To this extent, the economist's brief was to rend the veil of culture and reveal environment as the prime mover of institutional diversity. But this high degree of causal specificity was not intrinsic to the new science of law, which stood firm only on the premise of methodological individualism; nor, in the opinion of most economists who voiced one, was it quite adequate.

The materialist conception of law elicited more than a little skepticism. Schmoller, for instance, doubted that the natural and technical conditions of economic development were “solely and absolutely determinant of the organization of the economy in question” ([1874–5] 1898: 52). Wagner agreed, taking to task utilitarianism and radicalism by name: “Both extreme tendencies – that of the older economic individualism and that of socialism – tend all too often to consider economic-technical considerations the absolutely decisive point of view in problems of law, neglecting all others” ([1876] 1892–4: 2:§15).