Nilesh Jasani's Reviews > The Code of Capital: How the Law Creates Wealth and Inequality

The Code presents a compelling case on the law being the real oil of Capitalism. One rarely comes across a powerful, original idea in a short statement, like when the author asserts that an asset, intellectual property, financial instrument, or anything similar becomes capital only when legally codified.

A part of the book explains how capitalistic societies evolved only with legal shields on assets through various state-granted rights. Professor Pistor makes her case thoroughly, in a way only a good lawyer can. The rationales are especially forceful with the counterfactuals. In the author's hands, the dividing line between the leading and lagging market economies is not the varied implementation of free-market principles but their codification of capital.

As insightful as these arguments are, the book takes it a few notches higher with the discussions on the difference between private and public codes. State laws - or Public Codes - are not even a small part of the story of Capitalism. Lawyers' ability to draft contracts between consenting parties, or Private Codes, using effectively whatever state laws or jurisdictions they find suitable is the real driver.

Amid thickets of great insights of all kinds, the author keeps coming up with absolute gems. For instance, the author makes a convincing case when she argues how global markets can function with decent statutes from only a handful of jurisdictions - like New York or London or ISDA - since private players can shop around for the jurisdiction that works for them.

The book is particularly useful for the proponents or the opponents of smart contracts in the cryptosphere. Both sides will find a lot to ponder, even if they don't find anything to change their firmly held views. On the one hand, the supremacy of the Private Code should bolster the proponents' claims of the utility of quick, customizable, state-independent, smart contracts. The opponents will find more support in how the real power of any contract stems from the details and the resolutions that require lawyers, state coercive powers, and human negotiations ("no contract is ever complete" - another gem) rather than mere digitalization.

Many conclusions are extreme when taken verbatim. Do lawyers rule the economic world more than politicians, entrepreneurs, bankers, innovators, or consumers? The author's recommendations towards the end on what is needed to fix current economic malaises, notably inequality, are idealistic and in some contradictions to the arguments on how private contracts are shaped before. None of this takes away a tiny bit from the immense original and powerful nature of the book.