How Business Shapes Law: A Socio-Legal Framework

Much legal scholarship addresses law in terms of norms and incentives that affect business and individual behavior. This Article addresses the mechanisms through which business shapes law. There are two main ways in which business does so. First, business influences the public institutions that make and apply law.

Second, business creates its own private legal systems, including private institutions to enforce privately-made law. These two sources of law, publicly-made and privately-made, are interpenetrated; they reciprocally and dynamically affect each other. This Article provides a socio-legal framework for analyzing business’s interactional relationship with law. The Article argues that to assess the relation of business to law, we must look at three sets of institutional interactions: the interaction among public institutions (legislative, administrative, and judicial processes), in each of which business plays a critical role; the interaction of national and transnational institutional processes, with transnational processes having become more prominent; and the interaction among these public institutional processes and parallel private rule-making, administrative and dispute settlement mechanisms that business creates.

The dynamic, reciprocal interaction of public and private legal systems constitutes the legal field in which economic activity takes place.