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J WJOURNAL OF ECONOMICISSUES
Vol. VII No. 4 December1973
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et de jure had held that "the natural (i.e., the just) price has the
greatest chance to be the actual market price under conditions of
a free exchange market and stability of money."24 Where natural
justice is acceptedas an ideal, it convenientlycan becomea justification
for the abandonmentof a faltering system.25In this context, Smith
conceived the body of mercantilistlaw designed to shape and order
nascent commercial life in the shadow of the feudal system as an
unnaturalintervention.This laissez-faireoutlook fell withinhis sweeping definition of jurisprudenceas "that science which inquires into
the general principles which ought to be the foundation of the laws
of all nations."26
The naturalismof Smith's jurisprudencewas built on a different
base than the Ciceronianrationalismof Roman law. The latter held
thatconsultationbetween humanbeings exercisingintellectualpowers
is the essence of social progressand is a source of moraland expedient
advantage.27Perhaps the cleavage best can be seen by taking David
Hume's essay, "Of Justice,"28 as a point of departure. Hume sets
up the problem by describinghumancontact with the materialworld
and the control over property as the basic concern of justice. At
either extreme of absolute abundance (air and water) or absolute
scarcity (a shipwrecked traveller struggling for a single piece of
wreckage to sustain him), there is, on the one hand, no need for
humanorganizationand, on the other hand, no possibility of it since
the rawest physiologicalresponses of survivaldominate.29The whole
rangeof humanrelationsto propertybetween these extremes requires
the exercise of choice and reason among individualswho divide their
labor and become conscious that they benefit from exchange and
interdependence.Thus rationalitygoverns the principles of justice,
even though rationality and the social contract may not have been
responsiblefor the initiationof the organizationof society.
Smithseems to have carefully avoided makingthe initialconcession
that rationalandefficient (expedient)conductresultsfrom the exercise
of humanreason. Instead, he extendedthat area of basic physiological
responseexpressedby self-interestandthe so-calledinstinctto "truck,
barterandtrade" so as to postulatea physicallynaturalhumanbehavior
patternin interactionwith a physically naturalmaterialbase.30Thus,
in his view, the natural response of the individual combined with
the naturalconditions of the physical world result in a naturalprice
toward which aggregate behavior tends to gravitate. This approach
provides no reasonedjustificationfor naturalprice, but only the stark
reality that if the phenomenafunction so that exchange takes place,
the aggregate forces will establish a natural market confine within
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which exchange can and will occur. Individuals then may exercise
some voluntary choice and adjust their individual exchange rates
toward a central, naturally valid price. In general, the reasoning
individualplays littlerole in this system. Thisapproachto a "scientific"
definition of the economic process ignores much of the necessary
legal structuringof property rights requisite for economic planning.
Smithdismissedthis undefinedarea with his referenceto the necessity
for "a tolerable administrationof justice." Moreover, he seems to
have viewed justice in this areaas mainlycriminallaw for the protection
of private property.
Smith's response to the restrictivemercantiletraditionof legislating
prices, standards,and constraintsfor internaland external trade was
twofold. He denied its validity in terms of a "system of natural
jurisprudence" and demonstratedwith a Newtonian rationalization
of the benevolentharmonyof the physicalworldthateconomicprogress
would proceed best if freed from confining legal patterns and left
to the essentially physical drives of the individual.This reliance upon
a physical formulationas the basis for social analysis set the tone
for nineteenth-centurypolitical economy and, in a sense, for the
analyticaljurisprudencewhich paralleledit. Smith's views, however,
dealt with a changing relationshipbetween the legal structure and
the economy. As C. A. Cooke pointed out,
though Adam Smith made much of individual initiative and
criticizedgovernmentalcrampingof it, he attemptedto establish
a valid critiqueof law in terms of social and economic movement.
This study of social phenomenain terms of movementwas largely
abandonedin the nineteenth century development of both legal
and economic theory. Under the influence of Bentham, Austin
and Holland set up an abstract analysis of the legal equilibrium
of a social system, just as Ricardo, Mill and Jevons propounded
an equilibriumanalysis of the economic order. In both fields
the analysis was static; it investigatedthe workingof given legal
andeconomic mechanisms.And since for the purposeof deductive
theory these mechanismswere separately evolved, a separation
of economic and legal analysis came about.3'
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breach in any one of them disorders for a time the texture of the
whole."32 The forces that molded the common law, in Blackstone's
view, had "so intimately connected, so inseparablyinterwoven the
laws of eternal justice with the happiness of each individual, that
the latter cannot be attained but by observing the former."33 As
noted by Daniel Boorstin, "the theory that the pursuitof self-interest
was somehow bound up with the naturalharmonyof the world, had
a peculiar usefulness for Blackstone. It was, in fact, the principal
notion by which the doctrine of natural law was to be made safe
and conservative. He used the current theodicy to limit the range
within which man's reason should criticize existing institutions, and
to show how restricted was man's right to appeal to Nature against
the positive law."34 Although Blackstone out of necessity embraced
the time-honoredlegal precept that "what is not reason is not law,"
he displayed an uneasiness about individual reason tamperingwith
what he regardedas the inherent rationalityof the existing system:
"And it hath been an ancient observation in the laws of England,
that whenever a standing rule of law, of which the reason perhaps
could not be rememberedor discerned, hath been wantonly broken
in upon by statutes or new resolutions, the wisdom of the rule hath
in the end appearedfrom the inconveniences that have followed the
innovation."35
While Blackstone's work was a conspicuously successful contribution to the orderly study of the common law, the Commentarieswere
inadequate in the realm of commercial law. According to Fifoot,
"English lawyers had been so long preoccupied with the problems
of real property that they felt themselves strangers to a generation
that knew not feudalism." Blackstone was no exception and "was
stillobsessed with the refinementsof the feudallaw and theirextension
to the more abstract forms of property." Furthermore,"he had not
grasped the essential and revolutionarycharacter of the negotiable
instrument."36Nevertheless, it is of interest to note that Blackstone
assimilatedand perpetuatedan ancient formulationof a framework
of law withinthe limitsof whichindividualparticipantsexercise rational
choice as jurists or as bargainers.37 "There are . . . a great number
of indifferent points in which both the divine law and the natural
leave a man at his own liberty; but which are found necessary, for
the benefit of society, to be restrained within certain limits. And
herein it is that human laws have their greatest force and efficacy;
for, with regard to such points as are not indifferent, human laws
are only declaratoryof, and act in subordinationto, the former."38
It was withinthe "indifferent"zone, where regulationhadbeen found
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this day, as a caution and security against a loss? They cut their
bills and notes into two or three parts and send them at different
times: one by this day's post, the other by the next. This shows
the sense of mankind as to their remedy.
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LordMansfieldandtheLawMerchant
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Ibid., p. 221.
(1778)2 Cowper, 754.
1 Ld. Raym. 646.
Holdsworth,English Law, p. 179.
(1698), 1 Ld. Raym 360. Cited by Fifoot, Mansfield,p. 89.
Millerv. Race (1758), 1 Burr., 452.
Adam Smith, Wealth of Nations (Edwin Cannan, ed.), Book II, chap.
2 (New York: ModernLibrary, 1937),p. 293.
Ibid., p. 294.
Ibid., p. 2%.
(1762) 3 Burr., 1290.
Fabrigasv. Mostyn [(1774) 1 Cowper, 161].
Fifoot, Mansfield,p. 252.