 The process of coding capital basically dresses up simple assets. You just put an asset on legal steroids. That means if you have an asset on legal steroids, it will run faster than other assets. You will make more money with it. It might break down sometimes down the line, as people with too many steroids sometimes do, but you can win a lot of races. That's how you create value in law. You have priority rights, you rank higher. You have durability, you're protected against too many different creditors. People can, of course, make a lot of money and succeed in the economy just because they have great ideas and they have very good entrepreneurial skills. I don't want to say that doesn't exist, but trying to amass the amounts of wealth that people have today without the legal protections, I would argue is impossible. Okay, my name is Katarina Pisto and I teach at Columbia Law School in New York. Economists very often think that capital is one of the two factors of production next to labor. So you have capital and you have labor and then you produce and something comes out of that. Karl Marx already told us that capital is actually a social relation. So it's not just a thing, it's not stuff, but it's a social relation. And I'm just adding to that that it's a social relation of a certain kind. In order to put some capital into the production process, you need to have a right to do so and that's what the law does. You must have a right over money, machines, buildings, intellectual property rights, whatever you want to put into this process, you have to own it. So it's the law that creates the right to use things. It's also the law that creates capital in the sense that ordinary assets such as a piece of land is just a piece of dirt or you can promise me to pay me $100 million tomorrow. It's a nice promise. But it has any value only if I can enforce it. And enforceability is what really law adds to any ordinary asset. So in a nutshell, I'm saying, give me an object, a promise to payment and or maybe an idea. And with the right legal coding, I flip it into a capital asset. Yeah, most people think of the law as a relatively static thing. So the state allocates property rights and then leaves it to the actors in the market to reallocate them to trade them and ultimately you get an efficient outcome, right? What I'm basically saying is that the law itself, the rules of the game as also some people say, the rules of the game are themselves subject to change. They're malleable. And so the key issue for you as a lawyer, as an attorney working for a client is to make sure that your client has the right legal protection. So you're taking the legal institutions that you know, you're taking a new kind of interest that is supposed to be coded as something that generates wealth. So that's what capital does, right? It generates wealth and you can help protect wealth over time. And then you say, well, what legal institutions can I use to plug them together and create capital? And that can change. Now, one remarkable thing I found, and that was part of the historical analysis, was that the core institutions that have been used time and again to code capital, to take an asset and give it the right legal protection so that it can generate wealth and protect wealth. The core institutions have not changed much. So I basically say there are six. There's contract, property law, collateral law, trust, corporate law and bankruptcy law. So give me any object, give me a promise to pay, give me an idea. And with these elements, with this, I call them the modules of the code of capital, I can put together wealth generating assets. Capital has to generate wealth or protect wealth that you have generated in the past. So what the law really does is when you break it down in functions, first of all, it creates priority rights for the asset holders. So you have stronger rights or weaker rights. If you have stronger rights, you win. We know this from playing games of cards, right? So priority rules are really important. The second is durability. That's much more rarely talked about. Durability means basically that I can protect my assets against too many creditors over time. I can basically split my assets. I have my own personal asset. I have my house, my car, my machines, my washing machine, something. And then I can take some of my money and put it behind a corporate real limited liability company. And that can do the business. If the business fails, I lose my money in the business. But none of the creditors of the business can take my house. If my creditors come and take my house, my business might still run because I have separated them legally. That's what a corporation does. It's a separate legal person. It owns its own assets. And by splitting assets amongst multiple legal persons, I can diversify. But I also basically create legal walls between them and thereby enhance the chance that these different pools of assets will survive over time because they have only specific groups of creditors that have access to them. So that's durability, priority, durability. The third attribute is really important. That's where the law comes in. It's called universality. Universality means that we can make a deal, the two of us, and maybe we commit credibly that we don't budge. But somebody else might come along and doesn't know about our deal. That person has to respect the law too. If I have a title, if I have a property right, even a person that doesn't know that I have a property right can be made to yield because I can call up the police, I can go to court, I can find a bailiff that will evict the person if he trespasses into my house. So that's universality means that claims that have been recognized by the law, this is why the coding is so important, will be enforced erga omnis, as we like to say in Latinese, against the world. And then last but not least for financial assets, you get durability through convertibility. And convertibility is basically the ability to swap my assets into safer assets, ideally into cash when asset prices fall. I attain durability by the option basically to lock in my past gains. And that works either amongst private parties, I might have access to a credit line, I might have an option to convert certain types of assets, I might have margin calls against somebody else, or I might have access to the central bank that gives me cash if I'm short of it. Most people think of the state and the legal system as something that is vertical, so the state orders people what to do. It's criminal law, punishes you if you do wrong things, or it's regulatory law. It basically tells you you can't do certain things, so you have to pay something, fines, and other stuff. So it's a vertical relationship. Then sometimes people also realize that in constitutional law, we have rights against the state, again vertically. My property rights, the state can't take them away if it expropriates them, the state has to pay compensation. What I'm talking about is the horizontal relations of law. So when people economists think about the market, they think about actors that are outside the law of the legal system. But when they do contracts, when they claim their property rights, when they create a limited liability company, when they set up a hedge fund, even not as a limited liability company, maybe as a limited partnership, something else, they use the law, and thereby attain all these attributes that I mentioned. So the beauty is that you have in private law a very open legal system that is malleable, that has these modules that can be combined and recombined if you have the right lawyer. And in our global world, you can even start combining different modules from different legal systems and get even more out of it. So it's not that there is no law, it's a particular area of the law. Transactional lawyers have always worked with it. Country solicitors in England, if you go back to the 16th, 17th century, they have worked with that. And of course, even in continental Europe, with a slightly more rigid legal system, they too do a lot of transactional work for their clients. And then they must make sure that what their clients do is legal. You always hear this claim about it's legal. Even if you do a tax avoidance strategy, if you do this legally, they can't catch you. If you arbitrage around regulation, if you do it legally, you're good. So that's part of the job that lawyers do to make sure that their clients are compliant with the law, to find a way that they can do what they want to do that cannot be challenged by the law. But at the same time, therefore, also obtains the support from the law. Without the private law, we probably wouldn't have a market economy. It just would not exist on the scale. The state benefits from it a lot. I mean, one of the reasons that the state was fine with creating property rights because it also knew whom to tax. Once you own the land, we know whom we can tax. So property rights have always played an important role in the relationship between the elites and the state. More generally, I think a dynamic market economy works only if you have a relatively open-ended private legal system. So to some extent, what I'm describing is built into a system that calls itself a market economy. What I'm basically saying is capitalism is a market economy on legal steroids because the extent to which attorneys have been able to avail themselves on behalf of their clients of legal institutions to create private wealth, in part, at least at the expense of many others, and taking a social resource, which is the legal system, and using it to create private gains. That's a legal system that is basically an economic system that is on legal steroids and might have gone overboard in terms of creating enormous amounts of inequality along the way. We can trace the coding of capital all the way back to land. That's really when it started. So you can go back to feudal times. That's when property rights, as we still know them today, were created in the modern world. You can also go back to Roman times. But in the feudal period in England, property rights were created. And then you have to just adapt them a little bit to graph them onto other's assets. But an important coding process back in the 16th, 17th century in England was to create property rights in land, which did not exist in a formal, state-recognized fashion. There were used practices. People knew when they could use the land, when the commoners could take the land and have their cattle graze on it, or when the Lord could take it just to plant some crops or graze the sheep. And at some point, the landlords figured out that it would be more profitable to exclude the commoners and graze their sheep and many more sheep so they can put them into the factories and make more money or grow cash crops. So they excluded the commoners by building fences and building hedges physically on the ground. You don't need law for that. But it's also expensive. You battle on the ground because the commoners came back and broke down the hedges and broke down the fences. In the end, they ended up in court. And in court, then, arguments were made. Is it your land, my land? Do the commoners even have standing in a court? Because they said we have a collective right. We commoners on the courts that we don't recognize collective rights. So the landlords is what's mine then. In the end, the landlords also won on substance by saying our family has been here for ages. Since antiquity, we've always been here. So seniority was a winning argument to say we have the better right. Remember, priority. We have the better right by way of seniority. And therefore, the commoners have to yield to our requests. And that was, in the end, what the outcome was. It didn't happen in one day. I don't want to be mistaken on that. It was a process that took about a century. Battles in court, battles in the field. But the beauty of battling in court is that you don't lose lives, at least not immediately. It's bloodless. It might be impoverishing some people so they die too. It has to be clear about that. But doing a nonviolent, massive reallocation of property rights is really what the enclosure was all about. So that's the first example of enclosure. You can think about enclosure of knowledge. So next big enclosure movement is intellectual property rights. What kind of innovation? What kind of images? What kind of copyrights? Are its works? Do we protect by law? And thereby allocate to someone a monopoly to keep it for herself for a period of time. So intellectual property rights, I think everybody will understand immediately, exist only in the law. Land exists outside the law. But real estate, land that you can monetize, has to be coded. Intellectual property rights owe their very existence only to the law. And so you now take an idea. You claim a patent to them once the patent is registered. You can also take the patent and borrow against it. It becomes a collateral. So you can take the law to create an asset to then further dress it up in the modules of the Code of Capital. And all of a sudden, you can make a lot of money. The COVID vaccines are a fantastic example, because we're having various different patterns. Apparently, the American government through the National Institutes of Health also holds a pattern in some of the mRNA discoveries that led to the Moderna vaccine in particular. The government also subsidized real money, giving it to the pharma companies, but left them the property rights. So they patented their own property rights and now want to exclude others from using them or use them only on their terms, but basically wanted to protect their property rights. And that, of course, raises an interesting question, because the recognition of something as a patent is an act of law. There are built into the legal system also exceptions to your property rights. Maybe in the public interest, sometimes they have to yield to something else. That's something that's built into the WTO Treaty, which is why we're talking about this potential waiver at some point. But this is a classic example where we show that, yes, we have given somebody a property right, a patent. And the reason the justification is because otherwise they might not have created the vaccine in the first place. They won't innovate our whistle of the argument. People don't ever, ever, ever innovate unless they can make money from it. My argument is patent is patents intellectual property rights are not for innovation. People innovate. Musicians play. The patents are held by the corporations, not the musicians. There's a lot of innovation going on by scientists that are paid government salaries in the NIH and elsewhere, and that never see the money and nonetheless do their job, right? But you can't monetize it. That's the point. It's all about monetization. That's why it's capital. The process of coding capital basically dresses up simple assets. As I said before, you just put an asset on legal steroids. That means if you have an asset on legal steroids, it will run faster than other assets. You will make more money with it. It might break down sometimes down the line as people with too many steroids sometimes do, but you can win a lot of races. That's how you create value in law. You have priority rights. You rank higher. You have durability. You're protected against too many different creditors. People can, of course, make a lot of money and succeed in the economy just because they have great ideas and they have very good entrepreneurial skills. I don't want to say that doesn't exist, but trying to amass the amounts of wealth that people have today without the legal protections, I would argue is impossible. So law plays a hugely important role in dressing up these assets and making sure that you can protect them over time and protect them against others. You have exclusive rights, to some extent, to many of your assets. You can throw them behind legal veals. You protect them for next generation so they can incubate over time. All that wouldn't be possible. You would be much, much, much more exposed to the ordinary cycles of business, of crises, whether these are health crises or economic crises, if you didn't have that kind of legal protection.