Review of The Code of Capital: How the Law Creates Wealth and Inequality by Katharina Pistor
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BOOK REVIEW
Review of The Code of Capital: How the Law Creates Wealth and Inequality by Katharina Pistor Princeton University Press, Princeton, NJ, 2019, 298pp., ISBN 978-0691178974 Heather Hachigian1 Received: 28 December 2019 / Accepted: 22 July 2020 © Springer Nature B.V. 2020
Abstract The Code of Capital significantly advances our understanding of the origins of inequality and provides a framework for evaluating proposed solutions. But reviews have so far missed some of the most important insights of the book, including the author’s insistence on the indeterminacy of the law and the corresponding incompleteness of existing solutions to inequality that primarily rely on economic drivers. The review demonstrates the relevance of the book’s main contributions for evaluating the shared value thesis for investors and reflects on some of the solutions to the law’s indeterminacy proposed in the book, including the author’s surprising neglect of the increasing importance of ethics in business when innovation outpaces the law. The review concludes with consideration of the theoretical advancements that The Code of Capital makes for our understanding of inequality in the twenty-first century. Keywords Shared value thesis for investors · Legal foundations of capital and inequality · Ambiguity
Introduction Recent literature has witnessed a resurgence of concern with economic inequality. While the locus of debate has shifted over the years, from globalization and the moral imperative to remedy inequality (Wolf and Wade 2002; Wade 2004) to redistribution polices (Piketty 2014) and hybrid organizations (Mair et al. 2016), the capitalist system remains an elusive target for reform. Breathing fresh air into these debates and bringing clarity to the definition of capitalism, The Code of Capital traces the incremental process by which a privileged subset of assets—land, debt, equity ownership, and knowledge—have been coded in law over centuries. Once coded, these assets are imbued with the qualities of priority, durability, universality, and convertibility that mark their transformation to capital. The defining feature of a capitalist system then, according to the book’s author, Katharina Pistor, is the ability to assign enduring legal attributes to * Heather Hachigian [email protected] 1
Faculty of Management, Royal Roads University, 2005 Sooke Rd, Victoria, BC V9B 5Y2, Canada
assets, and not free markets governed by prices. Inequality is the inevitable result of a system that privileges some asset holders’ access to the legal code over others. While the book makes several important contributions to our understanding of the origins of capital and inequality, its most valuable contribution is to explain how the indeterminacy and malleability of the law systematically sustain inequality. Grafting this insight onto recent proposals for addressing inequality reveals significant vulnerabilities hiding in plain sight. Specifically, solutions that ignore ambiguity in the law will remain partial at best and are n
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