Wednesday, January 3, 2007
Lipshaw on Why the Law of Entrepreneurship Barely Matters (with apologies to the guy at Tony Lacey's party)
The first thing I need to do is apologize to the guy at Tony Lacey's L.A. party in Annie Hall for lifting his line: "Right now it's only a notion, but I think I can get money to make it into a concept ... and later turn it into an idea."
Like many of us, every once in a while I am kick-started into activity by an article that is thoughtful and interesting yet counter to my intuition (based on some experience) how the world works. That was my reaction to the article by Gordon Smith and Masako Ueda entitled Law & Entrepreneurship: Why Courts Matter. Gordon has previously posted on it over at Conglomerate, and I had some meandering blog thoughts about the thesis, namely, that I wasn't sure that law as such really mattered to entrepreneurs (as opposed to their lawyers, when they could afford to have lawyers). Certainly there is some law of entrepreneurship, but like most Anglo-American law, it is case law (about which Gordon has written) dealing with divvying up a smaller pie when things don't go swimmingly.
Since then, like the unnamed character, I took the blog notion and have tried to develop it into a concept, and perhaps some day, it will even be an idea. Here's the abstract of Why the Law of Entrepreneurship Barely Matters: Rules, Cognition, and the Antinomies of Transactional Practice, posted on SSRN, which, as it stands now, is a heavily annotated introduction to what will ultimately be a longer piece:
Despite valiant (if nascent) efforts to show that law, or at least courts and doctrine, matters in the broader study of entrepreneurship, I am skeptical that it really does. The reason goes to the fundamental orientation to rules and their application of law and lawyers, on one hand, and entrepreneurs, on the other. As much as law students like rules, and social scientists like theories capable of prediction and algorithms and models, there are inherent philosophical (and perhaps psychological) problems with the interaction of the lawyer and the entrepreneur. In the same way that the relationship of law to moral intuition is perennially debated and no less frequently unresolved as between empiricists and rationalists, foundationalists and anti-foundationalists, the social context of rule-following for legal ordering is at odds with the entrepreneur's orientation to rules.
In this Essay (which serves as an introduction to a longer work), I want to explore several themes. First, as the philosophers have shown, there is no rule for the application of a rule, and what we perceive as a given result is a matter of social congruence rather than a result inherent in the rule itself. The social and psychological orientation of those who create law, and those who create innovation, are at odds. Second, the predominant approaches to the science of law fail to account for the inherent paradox (or antinomy) of judgment. Third, the very nature of a legal or regulatory solution, by and large, is cognitive, and fails to address the non-cognitive aspects of entrepreneurship. Finally, there is a fundamental distinction between the definition of one's presently ascertainable rights in property, and private ordering to deal with future contingency. In the former, the law comes as close as it ever does to being constitutive; in the latter, what we say now is merely ammunition for instrumental use later.
It's apropos, as I am at the AALS meeting, to say that, just like another character at the Tony Lacey party, I'm just hoping all the good meetings aren't taken.