 Policies come from politics, and politics both shape the law and also are shaped by it, right? Think about the struggle for civil rights in this country, gender rights, labor rights. Those were, as you know, came from a long period of struggle against different legal frameworks over long periods of time. So this is not something that just happens cookbook manner, but it happens in a way that destabilize prevailing legal norms and legal institutions. My name is Jami Mauduth. I'm a professor of economics at Sarah Lawrence College, and I am also on the board of the Association for the Promotion of Political Economy and the Law, which is part of a broader ecosystem in the law and political economy tradition. There is an old debate in regards to the relationship between the public and the private, which others may sort of know as a relationship between state and the economy. And the legal realists and the original institutional economists in the early 20th century challenged the notion that the public politics and the law is separate from private. In other words, they challenged the claim that the economy is pre-political. And that was a pushback against the orthodox view that the economy is fundamentally pre-political and the law has to come in to make it efficient. So in other words, in that other framework, which becomes the basis of law and economics in the contemporary period, the claim was that the law is an apolitical technology, whereas the legal realists argued that in fact, the law is constitutive of the economy. So the foundational categories such as property and contracts, those are legal categories. And they arise through a wide range of political factors, struggles, court cases, the constitution, including. So the law and economics Chicago style separates out the two spheres, public and private, economy and politics. And so that's basically saying that in that framework is that the economy is pre-political, and then the law should come in to maximize efficiency and competitiveness as in perfect competition. The LPE, the law and political economy tradition, argues that in fact, that law and politics play constitutive roles in constructing the categories of the economy in terms of the structure of property rights, because property, for example, is fundamentally social. And so what I do and don't do with my property will impact you and others who may be property owners and who may not, in which case politics is going to structure our relationship with each other. So in that sense, the economy is fundamentally socially embedded. So another sort of way of thinking about law and political economy is that it situates law as a social and political category as opposed to something separate. So the background rules are exactly the basis of the action that happens in markets. So all the phenomena that we talk about as economists, supply and demand, profit-seeking behavior, the corporation, the costing and pricing and investment decisions of corporations, they rest on those background rules. And they historically, right from the beginning of capitalism, you've had this struggle between corporations and the larger society or businesses and the larger society and within businesses too. In terms of the shaping of those background rules, because businesses will seek to cut costs and sort of impose greater social costs on society. What it says is that first of all, there are two or three separate issues that are linked. One of which is that it says that there is no baseline economy from which to deviate from. So that's the conventional view that you've got this perfectly competitive market and then you've got market failure. And so even the sort of critics of neoliberalism amongst neoclassical economists would make that kind of an argument. They would talk about the need for institutions because of quote unquote market failure. That's actually the basis of the World Bank's programs internationally. This is arguing something totally different. They're saying that all markets are legally coded. All economies are legally coded. There's no benchmark. And so the issue implies that, in fact, the distribution of power relations, for example, is not due to some external factor. It's due to the rules of property rights and contracts and as they are legally and politically coded that distribute the power relations within society, which means that in order to understand inequality, one of the biggest issues of our times, and later on we'll talk about development, you need to sort of go break away from this idea of market failure as opposed to a perfect market and say, well, OK. If politics and the law play this constitutive role in the structuring of property contracts and the harms or torts that we do to each other or corporations and vis-à-vis society and so on, then that's where the action has to be and that's where the analytical focus has to be. That distribution of power relations as Robert Lee Hale, who was one of the great figures in this tradition, early 20th century, he was an economist at Columbia Economics Department, but he was also a law professor at the law school. So Hale's framework sort of informs a lot of this kind of thinking about the distribution of power relations and the political foundations of those. In the early 20th century until 1937 in the United States, the Supreme Court passed a series of pro-business rulings generally to the detrimental workers. The classic case was the Lochner v. New York, I think 1905, I believe it was, when the issue was about maximum hours of work and the Supreme Court ruled that it is an illegitimate state action to have maximum hours of work because there's freedom of contract. So no maximum hours of work. And if you don't like these long hours, go find yourself another job, freedom of contract, to which the legal realists argued that in fact, this was not the absence of law and regulation, it was regulating workers in a particular way. So in other words, there was no such thing as deregulation. Quite simply, all markets are deregulated, or are regulated, think of Carl Polani, I mean, he made this point very famously, right? That all markets are regulated. And so then the question arises, what's the form of the regulation and who benefits and who loses? Policies come from politics and politics both shape the law and also are shaped by it, right? I mean, think about the struggle for civil rights in this country, gender rights, labor rights. Those were, as you know, came from a long period of struggle against different legal frameworks over long periods of time. So this is not something that just happens Cookbook Manor, but it happens in a way that destabilized prevailing legal norms and legal institutions. So this is very much an institutionally grounded analysis of economics as opposed to the law and economics, which also brings in institutions but as outside the economy. And those institutions then are supposed to make the economy more efficient. Here they're saying the economy, the institution, the legal institutions, as they're politically constructed, they actually are at the base of the economy and they're shaping the relations of power and so forth within that economy. So the legal and political economy framework is the one which says that law and politics are at the base and are at the foundation to the economy. They are actively involved in sort of hardwiring it in different ways in different contexts, right? Okay, we're talking within the context of capitalism. This is for sure. Law and economics would say that the institutional framework is outside the economy and though that institutional framework has to be set just right to make that economy efficient. So the economy is separate from the public. The constitutional theory of money begins from the same premise that all economic phenomena are fundamentally legal and political. So the constitutional theory of money essentially characterizes money as a legal institution, which has a public base. But what is important to understand is that the public does not mechanically determine the money supply and that's the neoclassical framework. The neoclassical framework as we know is that the central bank controls the money supply. So the constitutional theory of money is more in the tradition of the endogenous money school, which we're all familiar with. The problem with the endogenous money school is, I mean, traditionally as the story has been told is that there's no accounting for what determines the unit of account itself, right? So loans create deposits and then the central bank comes along and fills up the deposits created and money supply, which is fine. And that's exactly right. The thing is though that what makes money money, in other words, what makes those deposits currency? That's a legal category. Then when the central bank tops up the deposits created from a loan, that's a legal category right there. It's basically taking a private liability, which is the deposit of the bank and topping it up with a public liability, which is the high-powered money, right? So the public is at the base of that and the bank itself could be a private corporation. I mean, there's a whole issue about what we mean by that and we can talk about that if we have time. But it's a private corporation run by private, that has private investors, there's that and the other, but there is a public base to it. Now the bank does not have to be a commercial bank, it could be a public bank as we know, right? So the institutional feature of that doesn't take away from this sort of public foundation at its base, right? So some authors have, for example, argued that in fact, banks are a public franchise and so that's exactly the point here. So the constitution basically means not just the big constitution, but it means the socio-political and governance framework within which money arises. So indeterminacy points to the fact that if you take something like property rights, that property rights can take different forms. So for example, on my property, I have, let's say I have a grocery store. Now my grocery store gives me, I have a title to it, I gives me the right to prevent somebody else from coming into it after hours, right? So the rest of the society has a duty not to come in when the grocery store is closed. But then, when the grocery store is open, the question then becomes, does that right duty filter into my hiring decisions? And the answer is, yes, in the sense that it's not a right anymore, it's I have the liberty to hire whoever I want to within limits, right? I have a liberty to hire and to fire. That's a basic liberty of capitalism. But then the question is, do I have the right to hire people of particular ethnic backgrounds or gender backgrounds? And the answer that depends on the context. If that is ruled out, then I don't have the right. Society has a right to prevent me from discriminating and that's a duty on my part. So what this says is that the bundle of rights that determine property are enormously shaped by context. So we can take, for example, German corporations. German corporations with 2000 and more employees, they are legally required to have employee representation on the board up to 50%. That's the Co-Determination Act of 1976, challenged by the Supreme Court, challenged in the Supreme Court by employers in Germany and it was struck down on constitutional grounds. So essentially what this is saying is that if we agree that in fact money is endogenous but money has a public foundation in the same way that the economy is endogenous but has a public foundation, then of course the monetary hardwiring of the economy can take different forms. And so if you look at, for example, economic history, let's say in Europe, post-war, you had the mobilization of central banking to finance reindustrialization and development and social development. And that was a form by which public money but also private commercial banks were structured in a particular way to finance post-war reconstruction and development with the central bank at the heart of that. That was one form of monetary mobilization, for example, in France. France on the other hand, imposed a particular form of monetary control in its ex colonies in Africa. That was another form which basically prevented them from industrializing and developing. So this is the point that politics is playing a crucial role in the institutional design of money. So in terms of development and the implications of the LPE framework, I can focus on two things. One is in line with what I was just saying, which is that as you know, one of the sort of at the heart of the Washington Consensus is central bank independence, right? And what I said previously was that in fact, central banks could be mobilized in a different way to finance social and economic development without being a printing press as often is claimed, right? I mean, this was John Maynard Keynes's actually point that in fact, the Bank of England would be separate but it would maintain an accountability to legislatures. So this would say that in fact, one could think about reconceptualizing development by reconceptualizing central banking and the mobilization of money and credit, which is right at the heart of all of this. The other issue is in regards to foreign trade, right? And as you know, there's an extensive literature on export-oriented industrialization. What economists don't usually talk about is the fact that in order to have exports or promote exports a la South Korea, Brazil, Mexico and so on and so forth, you need to deal with intellectual property rights, right? So in other words, there's no question of competition if you cannot get access to a certain kind of technology or if you tweak it a little bit and the WTO or you're challenged by global corporations that are dominant. What this suggests is the building up of a domestic legal capacity that could potentially challenge this kind of thing. So for example, Brazil has gone much farther than Mexico has in actually having a pretty powerful domestic, very well-trained lawyers who can take on international challenges in its export promotion policies. So for example, the aircraft, the indigenous aircraft produced in Brazil, Embraer, I think it's called, it was challenged by a Canadian aircraft manufacturer and saying, well, you know, and it was challenged successfully or one can talk about other things in the area of medication and medicines and vaccines, right? So there again, you have intellectual property rights and that whole issue of the nature of property which I think economists should be absolutely and centrally dealing with. Otherwise, if you don't deal with that, no exports, no social development, right? That's the background. And finally, inequality, yeah, which is to say, I mean, that's a problem everywhere, but in particular in the developing countries, another major issue, inequality, as we all know, doesn't happen from anywhere. It comes from the way by which assets and the economies itself legally coded. So that puts the spotlight on that particular issue right there.