From the Harvard Law School Corporate Governance blog:
In the paper, System and Evolution in Corporate Governance, which was recently made publicly available on SSRN, my co-author, Fabio Carvalho, and I explore the relevance of systems theory for an understanding of legal evolution, with specific reference to the law and practice of corporate governance. Evolutionary ideas play an important role in the contemporary corporate governance debate, being regularly deployed to support deregulatory initiatives and encourage belief in the likelihood of the global convergence of governance regimes. Close inspection suggests that many of these analyses are based on false analogies, drawn from misunderstandings of natural selection processes in the biological realm. They also suffer from a failure to address the issue of the social ontology of law. The key assumption in most law and economics analyses is that legal rules operate as surrogate prices. Given the importance of this step in law and economics reasoning, it is surprising that so little attention has been given to articulating and defending it. The effect, though, is severely to limit the value of the resulting analyses, by dissolving the distinction between the legal and economic systems.
I need time to digest, but find the thesis very interesting. Shadow pricing is a contribution to economic analysis of law most often associated with Gary Becker. I would love to see him and Posner respond on their blog.
For a not unrelated argument, see what Tjalling Koopmans had to say about Milton Friedman's argument for profit maximization.
For an extended comment on applications of systems theory to patent law, see the letter linked here.
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