Katharina Pistor, "The Code of Capital: How the Law Creates Wealth and Inequality" (Princeton UP, 2019)

New Books in Finance

"Most lawyers, most actors, most soldiers and sailors, most athletes, most doctors, and most diplomats feel a certain solidarity in the face of outsiders, and, in spite of other differences, they share fragments of a common ethic in their working life, and a kind of moral complicity."

– Stuart Hampshire, Justice is Conflict.

There are many more examples of professional solidarity, however fragmented and tentative, sharing the link of a common ethic that helps make systems, and the analysis of them, possible in the larger political economy. Writing from a law professor’s vantage point, Katharina Pistor, in her new book, The Code of Capital: How the Law Creates Wealth and Inequality (Princeton University Press, 2019) explains how even though law is a social good it has been harnessed as a private commodity over time that creates private wealth, and plays a significant role in the increasing disparity of financial outcomes.

As she points out in this interview, and her chapter ‘Masters of the Code’, it is ‘critical to have lawyers in the room’, and they clearly have the lead role in her well-researched and nuanced thesis centered on the decentralized institution of private law. Professor Pistor builds on Rudden’s ‘feudal calculus’ providing the long view of legal systems in maintaining and creating wealth and draws on historical analogies including the enclosure movements as she interweaves her analysis of capital asset creation with a broader critique of professional and institutional agency. Polanyi and Piketty figure into Pistor’s analysis among many others, as does the help of the state’s coercive backing as she draws on the breadth of her own governance research and analysis of the collapsed socialist regimes in the 1990s, and a research pivot toward western market economies following the 2008 Global Financial Crisis.

Professor Pistor is a comparative scholar with a keen interdisciplinary eye for the relationship between law, values, and markets, dovetailing larger concepts with detailed descriptions of the coding of ‘stocks, bonds, ideas, and even expectations—assets that exist only in law.’ All of which informs her inquiry into why some legal systems have been more accommodating to capital’s coding cravings and others less so, as she describes the process by which capital is created. She moves beyond legal realism’s less granular critiques, and as reviewers such as Samuel Moyn have suggested – this book ‘deserves to be the essential text of any movement today that concerns itself with law and political economy’.

Katharina Pistor is the Edwin B. Parker Professor of Comparative Law, and the Director of the Center on Global Legal Transformation at Columbia Law School.

Keith Krueger lectures at the SHU-UTS Business School in Shanghai.

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