Fostering Growth Through the Legal System by Robert Litan

In 2008, the Kauffman Foundation launched its Law, Innovation, and Growth (LIG) initiative to encourage legal scholars, economists, and other social scientists to examine ways in which the legal system – viewed broadly, and not only in a traditional legal silos (contracts, torts, property, antitrust, and so on) – can be improved to better foster innovation and economic growth.

LIG will build on the enormous contributions of the Law and Economic (L&E) literature, while differing in certain important respects. With some exceptions, L&E has focused on the improvement of static efficiency, or the size of the economic pie at any given point in time. While this objective is certainly important, over the long run, the gains to society from faster growth will swamp any one-time improvement in static efficiency. Accordingly, LIG is explicitly about innovation and growth, and thus dynamic efficiency. In particular, what rules, procedures, norms, and institutions are most conducive to innovation and growth?

There is yet another difference between L&E and LIG. Whereas the former L&E “movement,” by definition, involved only the disciplines of law and economics, we are already seeing evidence that LIG will bring into its orbit other social and hard sciences, such as biology, psychology, computer science, sociology, and complexity. Economics, as a discipline, does not have a monopoly on the understanding of innovation and growth, which also are inherently social and organic processes. Might we therefore learn from a broader set of disciplines in fashioning laws and institutions to foster innovation and growth? We hope so.

Toward this end, the Kauffman Foundation is pleased to support the research and related activities of the Berkman Center. As described elsewhere on this website, the Center works at the cutting edge of the law and technology, and thus is ideally positioned to provide guidance to scholars and policy makers about how best to use the law and the legal process – as it exists now and as it evolves in new venues such as cyberspace – to advance both innovation and growth.

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