Probing the Legal-Economic Nexus: Takings, 1978-1988

Abstract

In his book Legal Foundations of Capitalism [1924], John R. Commons traces the evolution of the legal concept of property in America, in response to the transformation of the economic system, from the recognition of physical property only to the recognition of both physical and intangible property. From there he analyzes the effects of this evolution on the institutional structure of, and relations within, society. This legal-economic nexus-the idea that economy is a function of law and law is a function of economy-illustrated by Commons and more recently elaborated on by Warren J. Samuels [1989], is fundamental to an institutionalist law and economics. Over the past 15 years, several prominent Supreme Court cases have dealt with government regulatory takings of private property.1 One result of this string of cases has been the development of a fairly well-defined set of criteria for what constitutes a taking of private property. Furthermore, these cases led to President Reagan's Executive Order 12630: Government Actions and Interference with Constitutionally Protected Property Rights [1988], which intemalizes much of the recent takings jurisprudence to the government's regulatory process. By examining these matters through the lens of the legal-economic nexus, we see that conflict between economic interests is resolved through