Since at least the late 1970s, popular political and economic debates in the United States have often been framed in terms of a choice between “government” and “the market.” In addition, debates have often assumed that “the market” is associated with freedom while government “regulation” or “interference in the market” constitutes oppression.
This article begins by making the familiar observation that the distinction between “government” and “the market,” at least when taken at face value, makes no sense. Even idealized laissez-faire markets are creatures of the state and its market-structuring laws, including criminal law and the laws of property, contracts, and torts. Far from being spontaneous natural orders, markets are changeable, politically determined legal constructions. Moreover, there is no single set of rules that constitutes “the free market.” Markets can be designed in any number of ways, often with relatively predictable advantages and disadvantages for different groups. How a state designs markets is inevitably a matter of political choice. There is no natural or politically neutral baseline.
These arguments will be familiar to generations of scholars in fields from anthropology to law to the history of economic thought. Within legal academia, attempts to draw attention to the ways in which the state creates markets through legal rules have recurred for over a century, from the legal realist movement, to the critical legal studies movement (“CLS”), to the flourishing law and political economy movement (“LPE”) today. Yet the legal institutionalist view of markets as legally constructed has never significantly shaped popular economic debates in the United States.
This article has several goals. Above all, it aims to be a resource for readers who are encountering the critique of the “government versus market” distinction for the first time. Not only “pro-market” libertarians, but also contemporary progressives who criticize the economic policies of the last four decades as “free market fundamentalism,” or call for greater “government intervention” to “tame the market,” often assume the validity of the distinction. For those who are unfamiliar with the legal institutionalist view of markets, the article provides an introduction.
The concluding section of the article addresses readers who may wonder why rejecting the “government versus market” distinction matters. The section argues that a legal institutionalist reframing of economic debate could help to undermine one of the ideological cornerstones of entrenched economic inequality in the United States: the punitive myth that unequal economic outcomes are best understood as “just deserts” for the efforts of individuals, rather than as the product of a long history of government policies.
The article also intervenes in recent debates surrounding the use of the term “neoliberalism.” If “neoliberal” thought distinguishes itself from “laissez-faire” or “classical liberal” thought by its promotion of a “strong state” to defend markets, then, the article argues, the public economic discourse of the “neoliberal era” in the United States was, paradoxically, not neoliberal.
Finally, an appendix to the article provides a survey of contemporary legal institutionalist thought across several fields.
Markets as Legal Constructions,
91 U. Cin. L. Rev.
Available at: https://scholarship.law.uc.edu/uclr/vol91/iss3/1