The Code of Capital is a cool book that is all about the interactions between the law and the economy. Pisotr writes that contract law, property law, corporate law, bankruptcy law, and trusts are the building blocks that give the attributes to assets that privilege its holder. The law goes on to rank competing claims to assets, extend those claims over time and space, and allow holders to claims on assets into state money on demand, protecting their value. The book is very theoretical at times, but then also very grounded when she gives examples throughout. Critically, Pistor is constantly coming back to the fact that there is no capital and no capitalism without the protection of the state, and that without state power to enforce claims to capital, the capitalist economy could not function. She even quotes Adam Smith, who wrote that "Property and civil government very much depend on one another. The preservation of property and the inequality of possession first formed it, and the state of property must always vary with the form of government."
With regard to corporations, Pistor is critical of how the trust and corporate structures allow individuals to hide behind the corporate veil, and identifies corporations as capital minting operations that can partition assets and shield them to access low-cost loans and find favorable tax and regulation regimes. She compares corporations to partnerships, writing that because partners put their own money at risk, they tend to be more cautious since they aren't investing other people's money like corporations do. However, partnerships tend not to last as long because they only last as long as the partners want to cooperate and have the resources to do so, whereas a corporation may outlive all of its founders.
I found the section on intellectual property to be very interesting. Pistor started by quoting Supreme Court Justice Louis Brandeis, who claimed that "the noblest of human productions-knowledge, truths ascertained, conceptions, and ideas-become, after voluntary communication to others, free as the air to common use." But that idea has been completely flipped on its head since he said it in 1918. In fact, the Supreme Court decided in 2013 that merely isolating DNA sequences may not be a patentable process, but distinguished some more artificial forms of DNA manipulation as patentable.
One of the most significant points that comes up over and over in the book is how the legal systems of New York and the city of London dominate the world economy. Today, 40% of all contractual disputes in the world are governed by English law with another 17% governed by the laws of New York. But is it because of the unique aspects of the common law, or for some other reason, like the fact that the UK and the USA have both been great sea powers? Pistor writes that common law systems tend to have bigger and more liquid financial markets than civil law countries like France, but I am not sure there is a causal relationship there like she implies. Bu she gets into some interesting comparative law in the book. Pistor writes that in the UK, litigants usually don't have client contact and are known as barristers, whereas the transactional lawyers are known as solicitors. Meanwhile, Germany trains young people in the legal profession to be judges first, and then they may enter private practice as attorneys.
Miscellaneous Facts:
- Between 2002 and 2015, the US Patent Office granted 4.6 million patents. Only 12% went to individuals while 43.5% went to foreign companies and 44.1% went to US companies.
- Ther Netherlands abolished patents in 1869.
- In 1984, the top fifty law firms in the USA had on average 259 attorneys and an average revenue of $3.4 million. But by 2006, the average top-fifty law firm employed 974 attorneys and brought in revenue of $40 million annually. Whereas the average partner in 1984 made about $300,000 annually, the average partner in 2006 made $1.5 million.
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