For some orthodox economists, markets are conceived as timeless and pre-existing spaces where individuals and companies interact, and legal institutions later intervene to reduce transaction costs and promote efficiency. In this view, the law is an exogenous variable that consecrates property, protects contracts, reduces uncertainties, corrects failures, and discourages opportunistic behavior.
The critical institutionalist tradition challenges this premise, arguing that markets are not “natural realities” to which the law applies, but rather historically constructed institutional architectures, of which the law is a constituent element. This tradition rejects methodological individualism, the idea that economics can be explained by the rational action of abstract individuals with given preferences, who relate economically before any institution.
Institutional Architecture of Markets
The old institutionalists, such as Veblen, Commons, and Mitchell, shifted the economic analysis to habits, transactions, organizations, coercion, and historical processes. Karl Polanyi, a classic in economic sociology, went further, showing that the expansion of the self-regulated market was an institutional construction and, above all, a political project, not a spontaneous result of a natural propensity for exchange, barter, and bargaining.
Institutions certainly constrain behaviors and help organize economic relations, establishing limits, distributing rights, and imposing duties. However, this is only one of their functions. Authors like Chang and Evans have expanded this understanding, highlighting the enabling and constitutive dimensions of institutions, which can make possible forms of coordination that would not exist without them and simultaneously shape interests, values, expectations, and worldviews.
The critical institutionalism raises a discussion about which rules and institutional arrangements make certain objectives possible, in a bidirectional relationship between structure and action. The metaphor of the enabling institution is powerful for economic law, as it creates capacities and gives meaning to social change, establishing common parameters, reducing uncertainties, organizing expectations, and coordinating behaviors.
This distinction is important in relation to more orthodox approaches to the role of institutions. If one starts from the primacy of the market, institutions appear as external mechanisms, called to make the market work better, but if one recognizes that the market itself is institutionally constituted, the institutional quality ceases to be a question of identifying a universal set of “good institutions” and becomes a historical and political question.
The rules also play a second-order role, distributing power among economic agents. This distribution of power explains why many poorly designed rules persist, while others, well-established, do not produce effects or are not applied.
Research Agenda for Economic Law
The institutional architecture of markets can be understood as a research agenda for economic law, understood not only as a set of norms but as a kind of social technology. “Architecture” does not mean centralized design, nor does it presume that there is a single architect. It is about looking at the combination of rules, organizations, institutional arrangements, competencies, procedures, infrastructures, and practices that shape a market. This architecture is historical, contingent, and disputed, resulting from legislative, administrative, and judicial decisions, business practices, state capacities, private standards, and learning processes, in the broader context of political economy.
A research agenda like this also repositions the state and its possibilities for institutional reform in a more sophisticated and propositional analytical position. State capacities, Evans points out, are not confused with the size of the state or indiscriminate intervention. What matters is the capacity to formulate objectives, coordinate actors, build institutions, and act in close relation, but not captured, with economic agents.
In Chang and Evans, the developmental state appears as a particularly expressive example of how institutions can alter economic trajectories. Development is not just the result of individual choices within a given structure, but it involves the deliberate construction of institutional capacities that make change possible.
The conflict over the rules explains the effects of feedback, as well as the relationships between global and local rules, which distribute power and shape preferences in domestic environments. This change in perspective makes research in economic law richer and more situated in its historical moment.
One of the main theoretical gains is not hiding this dimension under an appearance of neutrality. A critical institutionalist theory of economic law can investigate markets as social and historical processes and, at the same time, critically examine the legal architectures that sustain them, as well as the distributed powers, their beneficiaries, and the losers. The law participates in the construction of the conditions in which certain economic relations can exist, coordinate, expand, and transform, and the field of economic law can be seen as the institutional architecture of markets.
In this sense, investigating this field means repositioning the law within the political economy, not as a market intervenor, but as one of the elements that help build, historically and politically, the forms by which the economy organizes itself. The law is part of the social technology that creates the infrastructure for economic action, and understanding this is essential for developing a more effective approach to economic law and institutional change.
