A legal theory of finance

This paper develops the building blocks for a legal theory of finance. LTF holds that financial markets are legally constructed and as such occupy an essentially hybrid place between state and market, public and private. At the same time, financial markets exhibit dynamics that frequently put them in direct tension with commitments enshrined in law or contracts. This is the case especially in times of financial crisis when the full enforcement of legal commitments would result in the self-destruction of the financial system. This law-finance paradox tends to be resolved by suspending the full force of law where the survival of the system is at stake; that is, at its apex. It is here that power becomes salient. Journal of Comparative Economics 41 (2) (2013) 315-330. Center on Global Legal Transformation, Columbia Law School, 435 West 116th Street, New York, NY 10027, United States. (C) 2013 Association for Comparative Economic Studies Published by Elsevier Inc. All rights reserved.