Working Paper: NBER ID: w10346
Authors: B. Zorina Khan
Abstract: Recent scholarship highlights the importance of institutions to the processes of economic growth, but the precise nature of their relationship bears further examination. This paper considers how the evolution of legal institutions has contributed to, and in turn been affected by, major technological innovations. The first section of the paper examines the U.S. intellectual property system. Patent and copyright laws, and their interpretation and enforcement by the federal judiciary, certainly influenced the course of technical and cultural change, but it is clear that they did not develop independently of the state of technology and of the economy. Both the statutes and their interpretations altered in response to the introduction and diffusion of new technologies. The second section explores in more detail the impact of some of these technological innovations -- including steamboats, railroads, telegraphy, medical technologies, and automobiles -- on the common law, regulation and insurance. Such technological advances often led to institutional bottlenecks, which then required accommodations in legal rules and their enforcement. Although the common law had some capability for economizing on legal adjustment costs through 'adjudication by analogy', the socio-economic changes wrought by major innovations ultimately produced more fundamental change in legal institutions, such as shifts in the relative importance of state and federal policies, and in the degree of reliance on regulation by bureaucracy. In sum, the historical record of the evolution of legal rules and standards in the United States indicates a remarkable degree of flexibility as such institutions responded to changing economic circumstances.
Keywords: Technological Innovations; Legal Institutions; Economic Growth; Intellectual Property; Historical Analysis
JEL Codes: N4; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technological advancements (O33) | Evolution of legal institutions (O43) |
| Technological advancements (O33) | Adaptation of intellectual property laws (O34) |
| Introduction of steamboats and railroads (L92) | Changes in property rights and liability laws (K13) |
| Technological changes (O33) | Legal adaptations (K41) |
| Judiciary's role (K40) | Mediation between technological advancements and legal standards (O30) |
| Legal doctrines (K19) | Meet challenges posed by new technologies (O33) |
| Technological innovations (O39) | Changes in transaction costs (D23) |
| Increased pace of legal activity (K41) | Innovations in transportation and communication (L96) |
| Technological states (O30) | Enforcement of community standards (P14) |
| Judicial recognition (K41) | Legal evolution to maximize social welfare (D69) |