A. Introduction

Institutions can have a decisive impact on economic performance. The law is particularly important in shaping the institutional framework for economic activities. Legal rules can be viewed as socio-technological devices used to help individuals solve the coordination problems and conflicts that arise in an environment of scarce resources. In such an environment, the law affects both the allocation as well as the distribution of resources, and is itself influenced and altered by economic evolution.  However, our understanding of the determinants and mechanisms of legal change from an economic perspective remains rather weak.  

The traditional neo institutional economics and law and economics perspectives have made a measured contribution to our theoretical and empirical understanding of legal change. Yet these two perspective are deeply rooted in neoclassical microeconomics, and as such, they remain at their core concerned with the impact of given legal rules on economic activities.  To a large extent, this reflects the inherent static nature of neoclassical microeconomics (stable preferences, rational choice behavior, and equilibrium), wherein the economic problem is reduced to optimization (i.e., choosing the best option from a given set of alternatives). The decisive question of how the legal alternatives themselves are generated is thus not analyzed and so novelty and change are assumed to be exogenous.

Change, on the other hand, is the main starting point of the evolutionary economics perspective.  Calling into question the stable preferences on which the traditional premise of optimization is based, evolutionary economics purports that innovation, uncertainty, and the “constitutional lack of knowledge” are central characteristics of modern economies which have to be addressed in economic theorizing. The perspective’s very aim is the explanation of economic, technological, or institutional change over time; central issues include the generation of innovations and their diffusion through imitation and learning. 

At the core of evolutionary economics lie three key assumptions or building blocks. First, while mainstream neoclassical economics assumes a...