Mutual Funds, Hedge Funds, and the Public-Private Dichotomy in a Macrosociological Framework for Law

Abstract

Macrosociology considers law to be one of the institutions of society and, hence, a fundamental component of a social system. Four macrosociological propositions underlie the instant article: (i) the institutions comprising a social system are, in the long term, compatible with one another; (ii) the compatibility of institutions includes, inter alia, concepts that are similar or identical across at least some institutions; (iii) the concepts and doctrines of the institution of law manifest the properties, including the central values, of the social system; and (iv) the properties of the social system are fashioned by system-level forces. Because the propositions are consistent with existing evidence, they are the foundation for an examination of the concepts of public and private. In the United States, the dichotomy between public and private is widespread both in social values and in law, as illustrated by the Investment Company Act. Under the Act, mutual funds are classified as public and hedge funds are classified as private. However, research is lacking on the source of social values that lead law to designate certain topics as public and other topics as private. In a macrosociological framework, the designation can be attributed to another institution or to the social system as a whole. These alternatives are assessed using data from a national sample of adults in U.S. households. Specifically, logistic regression coefficients are estimated for the relationship between (i) the strength of ties to each of four institutions (economy, education, law, and religion) and (ii) whether social values designate morality a public or private matter. In the sociology of law, (ii) is important because law incorporates societal designations of matters as public or private. The findings indicate that the designations are produced by the social system, not by an institution. The implications of this conclusion for the sociology of law are discussed.