The legal roots of innovation

Abstract

Since innovation in free economies depends upon market power, its roots will be found in whatever gives rise to market power. This will invariably be found to be some provision of positive law. As discussed in the first chapter, laws establishing and protecting private property are a necessary condition for markets to exist at all, even in the most primitive form. Markets as we know them to-day, however, have been brought into being by much legislation which has extended the reality of property far beyond its original limits. This legislation reflected a process of attenuation of the effect of medieval law on business which had been progressively evident since the Reformation. The Common Law, which is so important in Anglo-Saxon countries, has its roots in the Canon Law of the medieval church. Consequently, its reduced influence in these countries can be seen as an aspect of the waning of ecclesiastical power. Since property means the capacity to prevent others from doing what the property owner can do, any new legal means of limiting the range of activity of others, can represent an extension of property rights. Such an extension may be seen in the changing attitudes of the civil courts towards agreements in restraint of trade. Such agreements obviously extend the market power of those who make them, at the expense of others. The attitudes of the Courts to them evolved from partial suppression during the period up to the seventeenth century, to tolerance in the nineteenth and twentieth centuries.