From W. N. Hohfeld to J. R. Commons, and Beyond? A “Law and Economics” Enquiry on Jural Relations

From W. N. Hohfeld to J. R. Commons,and Beyond?

A “Law and Economics” Enquiry on Jural Relationsajes_724 840..866

By MASSIMILIANO VATIERO*

ABSTRACT. In this article we try to reformulate the approaches ofWesley Newcomb Hohfeld and John Rogers Commons on jural rela-tions speculating on the concept of positionality as introduced by FredHirsch in his original work on positional good and competition.Furthermore, by placing Hohfeld’s jural lowest common denominatorwithin the Commonsian transaction, we propose a more structuredeconomic description of the jural relations theory.

the existence of a marshal impliesthe existence of a number of soldiers

who are not marshalsP. H. Wicksteed (1910: 657)

I

Introduction

In a society there is a variety of individual interests. Hence, society mustdecide which of those individual interests to support by a legal system.In other words, by the definition and allocation of a legal system asociety transforms certain individual interests into legal entitlements.However, legal entitlements may come into conflict as well as it occursfor individual interests (Morris 1992). As a result, a proper analysis oflegal entitlements should take into account both the adversarial andrelational nature of legal entitlements. Instead, most economists have

*Post-Doc Fellow, Dept. of Economics, University of Siena. Email: [email protected] am in debt with Ugo Pagano and Antonio Nicita for introducing me to Hohfeld’s and

Commons’s thought. I am grateful to Luca Fiorito, Jared Nelson, and one anonymousreferee for helpful suggestions. A special thank goes to Giuseppe Niglia for his supportin the development of this article. The usual caveats apply.

American Journal of Economics and Sociology, Vol. 69, No. 2 (April, 2010).© 2010 American Journal of Economics and Sociology, Inc.

almost widely neglected the relational nature of entitlements. Buildingon Walras’s fiction (Bowles and Gintis 1993), economists have focusedon the study of rights as an exchange among physical things in the formof commodities rather than a relationship among people in the form oftransactions. Commons (1924: 47) finds the root of the prominence inthe economic study of allocation and production of physical thingsrather than legal relations related with such allocation and production,pointing at the fact that modern economic theory, with Adam Smith’sWealth of Nations, and the Industrial Revolution, with John Watt’sinvention of steam engine, started the same year.

John R. Commons, then, suggested the transaction as the centralunit of analysis rather than prices and quantities. In order to investi-gate this neglected area and to deeply understand the meaning anddynamics of rights, we start from the jural relations theory, mostlyidentifiable1 in the writings of W. N. Hohfeld and J. R. Commons, withthe purpose to reassess their contributions building upon the notionof positionality.

A jural relation is defined as a situation of a legal and material factupon which one by his or her will may restrict or claim to restrict,presently or contingently, with the aid of the law, freedom of actionof another (Kocourek 1920a). A jural relation is, thus, formed by oneadvantaged party called dominus or holder and a disadvantaged(counter)party called servus or bear (Kocourek 1920b). Between thesetwo parties, there are two major types of jural relations: those wherethe dominus may with the aid of the law require an act by the servusand those where the dominus may with the aid of the law repel an actof the servus. The former represents the progressive jural relationswhere the dominus of the relation acts toward another, whereby thelatter represents the regressive ones where the dominus controls theact of another toward himself or herself.2

The law and economics literature on rights rests on the study ofefficient legal arrangements as factors of a productive process. Inthis way, Coase (1960) shaped his famous theorem: in a null trans-action costs framework, given two activities if one party causes anexternal effect (or externality) on the other, the mere definition ofproperty rights on the effects of these activities yields to Paretoefficiency; and, when the efficient equilibrium is unique, this is

From W. N. Hohfeld to J. R. Commons, and Beyond? 841

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attained independently from initial allocation of rights. Differently, inthis article we focus on the consumption of jural entitlements (rightsor powers) and on the implications deriving from this consumption.For this reason, we recur to Hirsch’s (1976) categories of positionalgood and competition.

The most interesting work on this issue was proposed by UgoPagano (2007) in Legal Positions and Institutional Complementarities.He introduces the notion of strong institutional complementaritiesamong legal positions to denote their social scarcity (a typical featureof positional goods). Differently from Pagano, however, we investigatethe positional attribute of a jural relation by looking first to theproblem of the “access to” a jural entitlement and secondly to theproblem of the “exercise of” a jural entitlement. Moreover, we extendsuch analysis to the Commonsian transaction, illustrating the triadiceffects characterizing any jural relation.

The work is structured as follows. Section II introduces the notionof positionality. Sections III and V sum up, respectively, the Hohfel-dian and Commonisan jural relation theory. In Sections IV and VI weoutline the positional characteristics of, respectively, Hohfeld’s andCommons’s approaches. Section VII is devoted to our reassessment ofthe jural relation theory. Finally, Section VIII remarks on our mainfindings.

II

The Meaning of Positionality

As Pagano (1999) notes, though in traditional economic theory weusually consider two types of goods (private and public goods) andtheir intermediate combinations, it is possible to individualize a thirdtype: positional goods. Pure private goods are characterized by thefact that other individuals consume a zero amount of what eachindividual chooses to consume. It implies that others are excludedfrom the consumption of private goods that do not belong to them,and their position with respect to the consumption of these goods isnot altered by the consumption choices of other agents. This kind ofexclusion is, instead, impossible in the case of a pure public good. Fora pure public good, each agent must consume the same positive

842 The American Journal of Economics and Sociology

amount that other agents decide to consume. For instance, the light-house warns ships away from a hazard of some sort. The fact that aship is warned does not exclude that other ships may be warned at thesame time. In general, we can have a universal consumption of thelighthouse’s warning. For this reason the lighthouse is a typical publicgood.3 Conversely, a positional good is a good such that, given theconsumption choice of one party, the other(s) must consume acorresponding negative amount of what the first party chooses toconsume. Therefore, positional goods define a polar case with respectto public goods (Pagano 1999; Vatiero 2009b). The former could neverbe universalized: “what each of us can achieve, all cannot” (Hirsch1976: 5).

The existence of positional goods determines positional competi-tion. Positional competition, rather than normal competition, does notrest on the intrinsic characteristics of a good. Better, it is referred to asa competition of people for positions, rather than competition forperformance. It is based on the relative production (from the supplyside) and consumption (from the demand side) of that good withrespect to production and consumption by other agents involved inthe competition. In other terms, from the supply side the purpose ofpositional competition is to make products with slightly better qualityand slightly lower price than competitors, rather than to make prod-ucts with the best technological quality and the lowest possible price.Symmetrically, from the demand side, positional competition impliesbuying slightly more and slightly better goods than those otherconsumers buy.

[I]f the Joneses buy a large car, this may arouse the envy and admiration oftheir neighbors, pleasing the Joneses. Suppose in particular that this statusarises from relative and not absolute levels of consumption. That is, it is notjust that the car is big but that is bigger than those owned by the neighborsthat also matters. Then, first, the good is positional in the sense of Hirsch(1976). Second, the standard problem of choosing consumption levelsbecomes a game between consumers. Individuals will engage in compe-tition in terms of conspicuous consumption of the positional good, that is,in a game of status. (Hopkins and Kornienko 2004: 1087–1088)

With such goods, indeed, we have a relative maximization like in agame of status (Shubik 1971): individuals’ behavior does not alwayssupport the hypothesis that the absolute payoffs of the game are being


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maximized. Nor do the behavior patterns even support the hypothesisthat a utility function positively correlated with the score is maximized.Indeed, agents might be not self-interested,4 or better, they might beenvious (Veblen 1899; Foley 1967; Varian 1974):

If, as sometimes assumed, the incentive to accumulation were the want ofsubsistence or of physical comfort, then the aggregate economic wants ofa community might conceivably be satisfied at some point in the advanceof industrial efficiency; but since the struggle is substantially a race forreputability on the basis of an invidious comparison, no approach to adefinitive attainment is possible. (Veblen 1899: 25)

So, as Veblen argued, individual utility may depend on the compari-son of one’s own consumption to that of others, as well. As a result,besides Smithian egoism (or self-regarding), we can individualizeVeblenian envy (or relative-regarding) as another possible behavior ofeconomic agents. Putting it differently, individuals may decide tomaximize relative payoffs instead of absolute payoffs. This implies thatthe satisfaction of individual preferences can alter by itself the way inwhich others seek to satisfy similar wants, in contradiction with thetextbook assumption about the independence of preferences (seeShubik 1985).

III

Hohfeld’s Jural Lowest Common Denominator

Hohfeld’s approach follows Kant’s (1871) rule: analyzing the universal(das Allgemeine) through the particular (das Besondere) in the singular(im Einzelnen). In fact, in his book Some Fundamental LegalConceptions as Applied in Judicial Reasoning Hohfeld sets fortheight fundamental conceptions—the lowest common denominator—by which he believed all legal problems could be stated: right, duty,privilege, no-right, power, liability, immunity, and disability. Gener-ally, as noted by Hohfeld, privilege, power, and immunity are alto-gether referred to as “rights” by the lawyer, but they are quite differentin their implications and, thus, Hohfeld offers a more sophisticatedterminology distinguishing among them more rigorously. The defini-tion of these conceptions is derived from a scheme of “correlatives


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and opposites” rather than from a formal and aseptic way, with theaim to solve concretely practical problems that arise in everyday workof lawyers and judges.

Correlatives (Figure 1) describe the jural relation first from the pointof view of one person and then from that of the other. Given twoagents B (like Billy) and S (like Sam), according to Hohfeld, if B hasa legal power, he has by definition a legal ability to alter some of S’slegal relations, who, therefore, is under liability; then power andliability are correlatives. Similarly, right and duty, privilege andno-right, and immunity and disability are correlatives as shown inFigure 1. Note that “[e]ach pair of correlatives must always existtogether” (Corbin 1919: 166).

Differently, for opposites (Figure 2) no pair of them can existtogether. They denote two legal positions that exclude each other. Inother words, they represent the opposite direction of the content ofthe jural relation. For instance, when B has a right, B cannot have ano-right with respect to the same subject matter (Corbin 1919: 166).

Figure 1

Figure 2


Therefore right and no-right as well as privilege and duty, power anddisability, and immunity and liability are jural opposites as shown inFigure 2.

In light of this, Hohfeld defines the eight jural positions as follows.A right, strictly defined, is one’s enforceable claim against another.

That is, a right means that B has a state-sanctioned assurance that Swill behave in a certain way toward B (Bromley 2006). Consistently,Pagano (2007) states that a right exists whenever B has a legal claimtoward S, so that S takes a certain action. But it occurs if and only ifS has with respect to B the duty to do such action. For instance, if Bhas a right against S that he shall stay off B’s land, the correlative is thatS is under a duty toward B to stay off the place (Hohfeld 1913: 32). Forthis reason, the correlative of right is duty and “[w]hen a right isinvaded, a duty is violated” (Hohfeld 1913: 32).

Correlatively, duty is the legal relation of S, who is commanded bysociety to act for the benefit of B, and who will be penalized bysociety for disobedience (Corbin 1919: 167).

Privilege is one’s freedom from the right or claim of another one.Similar to the right-duty relationship, B has a legal privilege toward Sto do a certain action if and only if S has no right toward B to preventhim from doing such action (Pagano 2007). Therefore, privilege is anabsence of duty “to do” otherwise, and its correlative must denoteabsence of right. Unfortunately, there is no term in general use thatcan be utilized to express this correlative of privilege, and the coiningof a new term was necessary for Hohfeld. The term he devised wasno-right,5 obviously fashioned upon an analogy to our common wordsnobody and nothing (Cook 1919: 7).

No-right, hence, is the legal position of a party endowed by societywith no-claim over another party.

Note that right implies a duty to do, whilst privilege a negation ofduty to do. For instance, B has a claim that S should stay off the land,but B himself has also the privilege of entering on the land; or inequivalent words, B does not have a duty to stay off and, hence, S hasno-right that B shall not enter (Hohfeld 1913: 32–33). By this token,we can illustrate the distinction between progressive and regressiverelationships as introduced above: right and duty compose a progres-sive one, whilst privilege and no-right a regressive one.


Power is the legal ability to do certain acts that alter legal relations,like transferring the ownership of property from one person toanother (Radin 1938): “in Hohfeld’s terminology any human beingwho can by his acts produce changes in legal relations has a legalpower or powers” (Cook 1919: 725). Consistently, Corbin (1919: 168)defines B’s power as the legal relation between B and S when B’s ownvoluntary act will cause new legal relations either between S and B orbetween S and a third person; that is, “to have power is to have theability to force another individual into a new legal situation against hisor her will” (Bromley 2006: 205). Coherently, the word “power”derives from the Latin posse that means possibility or ability (potis) ofbeing (esse), namely, power is a sort of possible claim (Terry 1884).Similarly to the right-duty relation, B has a legal power over S to bringabout a certain legal consequence for S if and only if some voluntaryactions by B would be legally recognized to have such consequencefor S (Pagano 2007). It implies that, whenever a power exists, there isat least one other human being whose legal relations will be alteredwhen the power is exercised. Hohfeld described this situation bysaying that, when power is exercised, the one whose legal relationswill be altered is under a liability.

Correlatively, S’s liability is the relation between B and S when Smay be brought into new legal relations by B’s voluntary act; S is,therefore, liable to have new legal relations created for himselfthrough the exercise by B (Corbin 1919: 169). These new relationsmay be with third persons, or with B, or with both, but the liability-power relation remains in force between B and S. Following Hohfeld(1913: 49), suppose S mails a letter to B offering to sell the former’sland to the latter for $10,000, such letter being duly received. Theoperative facts mentioned so far have created a power with regard toB and a correlative liability with regard to S. Indeed, B—by droppinga letter of acceptance in the box—has the power to impose a potentialor inchoate obligation ex contractu on S and himself; and, assumingthat the land is worth $15,000, the particular legal quantity—the“power plus liability” relation between B and S—seems to be worthabout $5,000 to B.

Hohfeld’s system describes immunity as any legal situation in whicha given legal relation vested in one person cannot be changed by the


acts of another person. According to Pagano (2007), B has a legalimmunity from a specific legal consequence with respect to an agentS if and only if S does not have the legal power to do any action thataccording to the law would have this consequence for B.

Correlatively, the one who lacks the power to alter other individu-al’s legal relations is said to be under a disability: a party is unable toor exempted from extinguishing one or more of the existing legalrelations of the counterparty.

Finally, Hohfeld makes a distinction between first and second orderjural relations. Right, duty, privilege, and no-right are included in thefirst one because their definition and enforcement is exogenous,whilst power, liability, immunity, and disability are second order juralrelations denoted by an endogenous mechanism of definition andenforcement. This distinction will be cleared below.

IV

Positionality in Hohfeld’s Scheme

We can reassess the Hohfeldian explanation by adding a third cat-egory, besides correlatives and opposites: negatives (Kocourek 1920b;Vatiero 2009a).

Negatives (Figure 3) describe the opposites as seen from the pointof view of the dominus and the point of view of the servus. Thiscategory relates not to the direction of the content of jural relations,but to the affirmation or denial of a quality in the content. Forinstance, if B is legally immune (or exempt) from having one or more

Figure 3


of his legal relations changed by S’s acts, the situation as seen from S’spoint of view is that S cannot have the legal power for altering B’srelations. Then immunity and power are mutually limiting as well asright and privilege, duty and no-right, liability and disability.

In Figure 4 we summarize jural positions in terms of correlatives,opposites and negatives, stressing the fact that the size of each legalposition affects and is affected by the size of each other. It allows usto intuitively introduce the definition of a legal equilibrium (Pagano2007): in Hohfeld’s simple two-individual relationship, the set ofactions for which B has power does not only define the liabilities ofS, but also defines the remaining actions for which S has the immunityand the set of actions for which B has no-power (or disability) tointerfere. The nature of this jural equilibrium stems from the fact thatlegal relations entail that the boundary between B’s powers anddisabilities should coincide with the boundary between S’s liabilitiesand immunities, and vice versa (Pagano 2007). This equilibrium restson the jural coherence of (and their mutual dependence between)correlatives and negatives.6

Negatives and correlatives denote two essential conditions for thecoherence of Hohfeldian jural relations. The first condition regards

Figure 4


access to jural position, whereby the second one regards its exerciseand enforcement.

1) Jural coherence on accesses: B’s access to one jural positionmust exclude S access to the corresponding jural negative.

2) Jural coherence on exercises: the exercise of B’s jural positiondetermines the jural correlative on S.

To explain these two conditions let us reassess the famous and quotedCoase’s (1960) example of the farmer and the rancher, in which thefarmer is represented by our Billy and the rancher by our Sam.

The first condition means that either S’s right to pasture his herd onthe neighboring B’s land or B’s privilege not to be interfered with inhis business from S’s pasturing herd, is defined. Symmetrically, eitherB has the duty to not interfere with the pasturing of S’s herd, or S’sherd has no-right to pasture on neighboring B’ land. It implies that S’saccess to right and B’s access to privilege as well as B’s access to dutyand S’s access to no-right for the same matter in the same circum-stance are jurally incoherent and inconsistent.

However, if the definition of accesses is not clear or if it is too costlyfor the ruler to make it clear, it can happen that between B’s right or S’sprivilege (and symmetrically between S’s no-right or B’s duty) there isa not well delineated area of potential rights and of potential privileges(as well as of potential no-right and of potential duty); these are whatHohfeld calls power and immunity (as well as disability and liability).Even in this case, the condition on jural coherence holds: power by aparty must exclude immunity for the counterparty in the same circum-stance. And, symmetrically, disability by a counterparty cannot coher-ently exist with liability for the party in the same jural context.

Therefore, in general, access by a party to one jural position impliesa reduction of access for the counterparty to the corresponding juralnegative. Hence, a positive consumption of access to a given juralposition by one party implies a negative consumption of access to thecorresponding jural negative for the counterparty. In light of this, wecan characterize access to negatives as positional. For instance, B’saccess to power is positional with respect to S’s access to immunitybecause any positive amount of access of the former must be jointlyconsumed with negative quantities of access of the latter. For this


reason, immunity or resistance to power is an integral part of thedescription of power because “[w]ere it otherwise, power could beextended indefinitely” (Galbraith 1983: 72). Then, B’s access to powerin the progressive form must exclude S’s access to power in theregressive form. This idea may be further exploited by saying thataccess to power is already an effective exercise of power. Indeed,given that access to power excludes access to immunity (and viceversa), mere access has by itself an effect on the counterparty. In thisrespect, defining jural relations as a mere behavior would mislead usinto presuming that these jural relations would no longer exist if theirassociated behaviors were interrupted. “Does the British monarchycease to exist when the members of the royal family are all asleep andno royal ceremony is taking place? Of course not: royal prerogativesand powers remain, even when they are not enacted” (Hodgson 2006:3). This holds true for every jural position; namely, access to a juralposition is by itself an exercise because it prevents a counterparty’saccess to the respective jural negative.

The second condition means that both S’s right to pasture his herdon neighboring B’s land and B’s duty to not interfere with thepasturing of S’s herd must be enforced and exercised. Similarly,enforcement should be granted to both B’s privilege to not be inter-fered with in his business from the S’s pasturing herd and S’s no-rightto pasture his herd on neighboring B’s land. Exercise of S’s right andexercise of B’s duty (as well as exercise of B’s privilege and exerciseof S’s no-right) must be consumed together in the same circumstanceto reach jural coherence on exercise.

However, if the enforcement of jural positions is costly, then theexercise of one party’s right may not be correlated with the exerciseof the counterparty’s duty. (Similarly, for privilege and its correlativeno-right.) Within this not well-enforced area, second order jural rela-tions rise. The enforcement of power for a party must be grantedalong with the enforcement of liability for the counterparty. And,symmetrically, the enforcement of disability for the counterparty mustbe granted along with the enforcement of immunity for the party inthe same jural context.

Therefore, the exercise of one party’s jural position must co-existwith the exercise of the counterparty’s jural correlative of that jural


position. Now, assume that B is the jural dominus, then—by itsdefinition—the exercise of his jural position disposes benefits tohim because his interests are reached. Conversely, interests ofS—the servus or the disadvantaged party—are not necessarilyreached; that is, the exercise of S’s jural correlative produces coststo him. In terms of behavioral disposition, the exercise of B’s juralposition is jointly consumed with a harmful exercise of the juralcorrelative for S. In this sense, the exercise of jural correlatives ispositional. That is to say, individual “price” of exercising should notpay only for the benefit of disposing but also for the relative dan-gerous effect on the counterparties, namely, price should be a sortof multiple price.

Lastly, differently from the jural correlatives right—duty andprivilege—no-right (namely, Hohfeldian first order jural relations), thejural correlatives power-liability and immunity-disability (namely,Hohfeldian second order ones) lead us to a diverse level of argumen-tation: under the second order jural relations, agents can, with theirown actions, alter legal relations.

First order jural relations rest on the actions of a court or publicofficials and on the legal requirements that agents cannot affect.Instead, in a second order relation individual efforts become relevantin order to delineate and enforce these legal relations. In other terms,when an individual action (as effort or investment, generally intended)impacts on the jural delineation and jural enforcement, the secondorder relations become the proper framework.

As a result, the second order jural relations depend on, and are setby, the relative impact of the investments of the parties. Indeed,individual efforts in a second order jural relation are in positionalcompetition because the impact of one party’s investments in the juralrelation depends on the relative level of the counterparty.

An example can clarify this mechanism: let’s take an employee-employer relationship. The employee could be the dominus if, forinstance, his endowment of skills is costly substitutable for theemployer and it is demanded by many alternative employers. In thiscircumstance, the employee can exercise the power over theemployer or, at least, the immunity from the employer’s authority. Butin order to obtain the jural position of dominus the employee’s effort


in growing his skills must be greater than the employer’s effort inseeking alternative resources to employee’s skills. Then, the impact ofone party’s effort depends on the counterparty’s effort. Moreover, itimplies that the choice on efforts will derive from a relative-regardedmaximization similar to the Veblenian envy.

V

Commons’s Transaction

Commons reformulated Hohfeld’s two-agent explanation of jural posi-tions by focusing on the fact that in any transaction there is adouble-ended performance, forbearance and avoidance. Let’s brieflydefine what Commons intended by transaction and then explain themeaning of performance, forbearance, and avoidance.

Commons’s notion of transaction is one of the most importantcontributions of Institutionalism. According to Commons (1924, 1931,1950), any transaction is composed of at least five parties: an agent,her competitor, her counterparty, her alternative counterparty and apublic official acting as jural enforcer who guarantees a perfect fitbetween the entitlements of the different agents (Pagano 2007;Bromley 2006). Roughly speaking, two buyers, two sellers, and apublic official are the basic and minimal components of Commons’stransaction. In this way, each agent ought to consider

the alternatives open to himself, the existence of actual, potential, possibleor impossible rivals, and the degree of power which he can exert withinthe limits of these alternatives . . . The social unit is not an individualseeking his own pleasure: it is five individuals doing something to eachother within the limits of working rules laid down by those who determinehow disputes shall be decided. (Commons 1924: 67–69)

Therefore, individual actions are really trans-actions rather than indi-vidual behaviors or exchanges of commodities (Commons 1931: 652).

Let us keep on denoting our two parties Billy and Sam as B and S,but in this case they represent a buyer and a seller of a good.Commons requires that we must add two further agents to thetransaction, for instance, Brad and Steven, indicated by B* and S*, whoare competitors of, respectively, Billy and Sam in buying and in


selling. Finally, there is a public official (hereinafter denoted by p.o.)who authorizes the transactions.

By this token, each “act is an action and a reaction with externalnature, or a transaction with persons, and, as such, is a moving point,a flow of performance, avoidance, forbearance” (Commons 1924: 81).For instance, B has a right (power) of performing a certain act until Sis not safeguarded by a privilege (immunity); and, consequently, S’sgrade of privilege (immunity) implies B’s forbearance. Moreover, otheragents, namely, B* and S*, are avoided by the B-S relationship. Aparty’s performance, then, is his possibility put forth in acting, hisforbearance is the limit he has on the possibility of acting, and hisavoidance is his choice of that performance instead of any alternativeperformance. Therefore, if a person chooses or is compelled tochoose an act, he avoids other acts (or alternatives) and he has toforbear a certain limit (by procedures) in his acting. This defines thecorrelation between performance, forbearance, and avoidance in aCommons’s transaction.

Commons reformulated Hohfeld’s first order jural relations asfollows. Power and opportunity are the two economic correspondentsof the physical dimensions of performance, forbearance, and avoid-ance. Power is the actual performance taking into account forbearancesderiving from the counterparty’s jural position, while opportunityrepresents the opportunity costs between performing and avoiding anact by others. Moreover, Commons criticized in Hohfeld’s classificationthe use of the term “opposites,” substituting it with the quantitative term“limits” that allows a quantitative meaning of more or less, much or littleand plus and minus. “Hence, by substituting the term ‘limits’ we havethe outside limits of a transaction consisting in the powers andopportunities of the parties, and the inside limits where right-duty endsand no-right–no-duty begins” (Commons 1924: 93). Commons appliesa similar matter to Hohfeld’s term “no-right.” This jural position does notimply an absence of right, but a limitation of a right. For this reason, hepreferred the behavioristic term “exposure.” Moreover Commons sub-stitutes the word “liberty” for Hohfeld’s term “privilege” because whilethe latter means a special advantage not permitted to others undersimilar circumstances, the former allows Commons to denote a (poten-tially) universal jural position (see Figure 5).


As a result, in a transaction the right of B is his right to require B*to keep off and let B do as he pleases with S. Likewise B* has a similarright against B respecting S*. In other words, when B has a right to actwith (or against) S, he avoids this opportunity to B*. It follows that ajural position of right for B is related to a jural position of duty (notto interfere in B’s performance) for B*, a jural position of exposure (toperform B’s requirements within working rules limits) for S, and a juralposition of liberty (namely, any compulsory with respect to B) for S*.

A further difference between Hohfeld’s and Commons’s analysisregards the distinction between first and second order jural relations.Commons denoted them as authorized and authoritative transactions,respectively. The authoritative transaction differs from the authorizedone due to the fact that the latter conceives the jural relation betweena private individual and a public official, whilst the former conceives therelationships between private individuals. In particular, transactions areauthorized when “the will of a superior party or parties to impose limitson their transactions by imposing or interpreting a rule of conductapplicable to the dispute” (Commons 1924: 87). It follows that aspecified right of one party is identical to the duty of another party. Inso doing the p.o. lets exposure and liberty come to the fore. Further-more, legal relations differ from nonlegal ones because of the fact thatthe former are expected activities of the p.o. in directing the use of

Figure 5


physical powers within society. In general, a government or judiciarysetting the rules of the transaction is needed to intervene as a p.o. withthe double purpose of correlating rights, exposures, liberties, and dutiesand making this correlation expectable to all the parties involved.7

However, any p.o. should be entitled of this power only to a certainlimit. This limit has to be granted by the “due process of law.” As aconsequence, liability constitutes p.o.’s responsibility in the use ofcollective power, and this limit becomes immunity for the p.o. fromdiscipline until the point where his responsibility ends. In this way,“legal rights and duties are none other than the probability thatofficials will act in a certain way respecting the claims that citizensmake against each other . . . the ‘law’ is there” (Commons 1924: 125).

As a result, the legal right of a party is the legal duty of hercompetitor, and the liability of the p.o. to perform competitor’s dutylies in his use of collective power to provide a remedy. Therefore, asshown in Figure 6, we see that: i) the right of B implies the liability (tocompulsion) for the p.o.; ii) the duty of B* implies the power (tocompulsion) for the p.o.; iii) the exposure of S implies the immunity(to compulsion to the other party) for the p.o.; and iv) lastly, theliberty of S* implies the disability (to compulsion her when the otherparty wants) for the public official.

VI

Positionality in Commons’s Transaction

Commons (1924) breaks the common way of looking into the struc-ture of any relation. While Hohfeldian correlatives—right and duty,privilege (or liberty) and no-right (or exposure), power and liability,and immunity and disability—involve one party and her counterparty(for instance, B and S), Commons’s scheme involves one party and hercompetitor (for instance, B and B*). The jural relationship betweenone party and her counterparty for Commons relies upon the juralopposites (or limits)—right and no-right (or exposure), privilege (orliberty) and duty, power and disability, and immunity and liability.Hence, in Commonsian transactions jural negatives, as intended byHohfeld, are right and liberty, exposure and duty, liability and dis-ability, and immunity and power.


To better explain the different perspective, let us assume that Billyis a buyer of work (then, an employer), while Sam is a seller of hislabor (namely, employee). In a labor legal relationship, as intended byHohfeld, employer B has a claim consisting in his right to obtain acertain task by employee S, and consequently, employee S has a dutyto perform a certain task. And, when employer B has not claimed toobtain a certain task by employee S, then employee S has no duty toexecute it and employee S is in a position of privilege while employerB is in a position of no-right. This is the illustration of an employmentrelationship by Hohfeld’s scheme. Assume that even Brad is anemployer and Steven is an employee in order to investigate therelation within a Commons’s transaction. In a Commons’s transaction

Figure 6


employer B has a right to obtain by employee S a certain task, and hiscompetitor, employer B*, may not claim the same task from employeeS. Then, employer B withholds employee S from competitor B*, whohas a duty to not freely assess a similar jural relationship withemployee S. Finally, while employee S is exposed to employer B’sclaim, employee S* has no duty with respect to employer B. Inaddition, employee S* may not perform a certain task and can freelyassess a jural relationship with employer B*.

As a result:

1. B’s access to one jural position must imply B*’s access to the juralcorrelative (i.e., B’s right implies B*’s duty). Notice that increasingB’s right removes alternatives for B*. We define this effect asCommonsian jural coherence on accesses. Moreover,

2. the exercise of B’s jural position determines the jural opposite onS. For instance, increasing B’s right increases the exposure for S.This represents the case of Commonsian jural coherence onexercises.8

Then, in Commons’s perspective, we have the following positionalcharacteristics. Given Commonsian jural coherence on accesses, anincrease of access to one jural position for one party reduces accessto his competitors; hence, any access to jural correlatives amongcompetitors is positional. Given Commonsian jural coherence onenforcing, an increase in performing a jural position for one partydetermines a rising of forbearance for the counterparty. In otherwords, the exercise of B’s jural position is jointly consumed with areduction of S’s jural negative exercise. Thus, the exercise of juralnegatives between agents is positional.

Finally, note that any change in a jural position for one party has adouble effect: on the one hand, it affects access for competitors; onthe other hand, it modifies forbearance of the counterparty. Thisdouble effect produces market failures when the “price” of this changedoes not cover both access and exercise effects. Similarly, for posi-tional goods, as Pagano noted,

[t]he existence, enforcement or, even, the definition of property rights is ashard in the case of positional goods as it is for the case of public goods.However, the consequences of the failure to establish property rights have


opposite signs. In the case of public . . . goods, the consequences of thisfailure implies that agent consuming the public good does not get paid forother people’s consumption; in the case of positional . . . good, theequivalent failure implies that agent consuming positive amounts is notcharged for the negative consumption of other agent’s consumption.(Pagano 1999: 71)

VII

Beyond Hohfeld-Commons’s Approach

As stated earlier, in Commons’s view the authoritative transactiondiffers from the authorized one due to the fact that the latter con-ceives the jural relation between a private individual and a publicofficial, whilst the former conceives the relationships betweenprivate individuals. In particular, Commons seems to neglect theendogenous and private jural orderings with respect to Hohfeld’sscheme. Indeed, Commons reduces the occurrence of privatearrangements because every uncertainty of the legal setting is solvedby the intervention of public officials. Instead, Hohfeld states thatprivate arrangements (denoted as second order jural relations) mayoccur along with jural incompleteness. In this sense, Hohfeld’sscheme seems more coherent and closer to New Institutional Eco-nomics9 than the old Institutionalist approach of John R. Commons.For our purpose, we will follow Hohfeld’s distinction between firstand second order jural relations instead of Commons’s authorizedand authoritative transactions.

Moreover, in a Commonsian transaction—extending the number ofagents involved—jural positions may be viewed as a multilateral formof relationship, rather than a bilateral relationship as suggested byHohfeld. In other words, Hohfeld’s analysis of jural position is dyadic,whilst Commons’s one is triadic. While a dyadic structure represents asociety where individuals interact pairwise, a triadic structure showsthat there are triangular or multiple interactions and effects (Basu1986). For our purposes, we will follow Commons’s triadic approach.

Lastly, Commonsian jural coherence on access and on enforcementmay be reformulated10 building on Sen’s (2002) distinction betweenfreedom of opportunity and process.11 Freedom of opportunity isconcerned with the possibility to achieve, rather than with the process


through which that achievement comes about: in this meaning, “morefreedom gives us more opportunity to achieve those things that wevalue, and have reason to value” (Sen 2002: 585). Freedom of processis concerned with the proceedings through which those thingshappen. In this second meaning, no matter how successful the personis in getting what he would like to achieve, the procedure of freedecision is attained by the person himself (Sen 2002: 585). Summingup, process is concerned with what we manage to accomplish, andopportunity with the real alternatives that we have to accomplish whatwe value (Sen 1992). These two aspects are strictly related to theCommonsian physical dimensions of forbearance and avoidance.Freedom of process concerns the enforcement of jural position andconsequent forbearance, while freedom of opportunity is based onaccesses to jural positions and their avoidances. However, these twofreedoms may overlap:

if a person values achieving something through free choice (and notthrough the end-product being delivered to him by someone else), orthrough a fair process (for example, wanting to “win and election fairly”,rather than just achieving a “win”—no matter how), then the processaspect of freedom will have a direct bearing on the opportunity aspect, aswell. (Sen 2002: 586)

Even avoidance and forbearance may overlap in the Commonsiantransaction: an alteration on enforcement may give rise also to analteration on access, and vice versa.

By this token, we define our reassessment beyond Hohfeld andCommons, as follows:

1) Commonsian jural coherence on access and enforcement isdeclined following the refinements deriving from Sen’s concernson freedom;

2) any jural relation is triadic, namely, is placed in a Commonsiantransaction; and

3) power is an endogenous jural relation in accordance withHohfeld’s scheme.

These three statements, which define a triadic Hohfeldian approach,provide new theoretical tools and issues for a broader analysis of alljural and economic phenomena, in particular for second order juralrelations.


One of these issues is the path dependence12 of power. Let usdenote centralization as an increase in the access to power by oneparty. This increase brings about a corresponding decentralizationprocess on the counterparty. In the same manner, let us denoteconcentration as an increase in the level of coercion for the powerholder and, correspondingly, de-concentration represents the oppo-site process for the counterparty. In other words, the process ofdecentralization of power changes the distribution of existing power,whereby the process of concentration of power increases the degreeof compliance.13 A party’s influence on the concentration of powerhas also an effect on its centralization, which once again intensifiesconcentration, amplifies the centralization, and so on. Indeed, giventhe strict correlation between Senian freedom of alternatives andSenian freedom of process, we have a strict co-dependence betweenaccess to and enforcement of power. For instance, assume a firmwith significant power in a market uses its power to create orenlarge its market power on a contiguous market. This conduct iscalled leverage, which represents a form of centralization of powerdue to the attempt to extend a position of power in another market,and thus curtails competitors’ market power in the second market.But this is not the end of the story. Besides the effects on accessand, thus, on competitors or horizontal counterparties, we mustconsider the effects on enforcement, which involve vertical coun-terparties (namely, suppliers and consumers). Indeed, the firm withleverage increases its alternative vertical counterparty options. Thisresults in a greater liability for the vertical counterparty because ofits greater substitutability. An alteration on access to power (namely,a process of centralization) increases the level of enforcement(namely, a process of concentration) by means of endogenousoutside options.14 At the same time, the rising level of enforcementprovides new economic resources to the firm that can be spent toamplify its access in a never-ending process. As a result, theco-dependence between enforcement and access, freedom ofprocess and alternatives, concentration and centralization maydescribe a process that some economists have defined as circularand cumulative causation (see Kapp 1976; Myrdal 1956; Young 1928;Kaldor 1985).


Circular and cumulative causation may lead to two final results:either accumulation of power becomes the means of new accumula-tion or, in order to prevent this occurrence, potential power subordi-nates endogenously coagulate in a countervailing power. On the onehand, the path dependence of power can lead to its polarization, onthe other hand, such path dependence may determine a balancingcountervailing power. The triadic Hohfeldian context, as introducedabove, can be used to study these results if and when they occur.

VIII

Concluding Remarks

In this work we have compared Hohfeld’s scheme and Commons’stransaction by the notion of positional good (Hirsch 1976; Pagano1999).

Both Hohfeld and Commons describe jural relations in a way thatwe have reformulated as positional on access and on exercise. ForHohfeld, a party’s access to one jural position must exclude a coun-terparty’s access to the corresponding jural negative. It implies thataccess to jural negatives is positional. Again, for Hohfeld, the exerciseof a party’s jural position determines the jural correlative on thecounterparty. It implies that exercise of jural correlatives is positional.For Commons, instead, a party’s access to one jural position mustimply a competitor’s access to the jural correlative. It implies thatincreasing access to one’s jural position for a party avoids access to hiscompetitors, and then access to correlatives among competitors ispositional. Moreover, for Commons, the exercise of a party’s juralposition determines the reduction of the counterparty’s exercise ofjural negative. Then, exercise of jural negatives is positional.

Lastly, Hohfeld offers a definition of power (and of second orderjural relations) that makes relevant any individual effort for the alter-ation of a jural relation. This approach along with the idea of trans-action as stated originally by Commons—which extends the analysisto triadic effects—provides a robust theoretical framework in order toinvestigate the dynamics among jural positions and, in particular, thepath dependence of power.


Notes

1. See Kocourek (1920a) for a detailed survey on the historical thoughtconcerning the definition and analysis of jural relations.

2. See Vatiero (2009a).3. Note that public goods are not always provided by the state. For

instance, a number of lighthouses in the 18th century were privately owned.4. In the same way, we can state that agents are affected by others’

economic welfare, as in the case of the relativistic view of poverty (Sen 1976),and choices, as in the case of the Keynesian beauty contest (Keynes 1945).

5. Cook (1919: 723) observes that,

[o]ne thing which at once impresses itself upon one who is familiarwith law, and especially with the work of writers upon jurisprudencewho preceded Hohfeld, is that the terms found in this scheme are withone exception [namely the term no-right] not new, but have alwaysbeen more or less frequently used.

6. It has been suggested that Hohfeld’s approach to his analytical juris-prudence resembles chemical analysis in that it breaks law down into funda-mental constituent elements (Simmonds 2001: ix). Indeed, Hohfeld studiedchemistry before turning to law and knew the physics and chemistry of thattime (Azzoni 1999); Paul Dirac (awarded with Nobel Prize in 1933) providedthe equation by which every particle has a correspondent anti-particle withthe same mass but with the opposite sign; so as Hohfeld stated that for anyjural position exists a correspondent jural position with the same content butwith the opposite sign.

7. It may be a sort of restatement of the role of the state in accordanceto the Coase Theorem.

8. Notice that, following Commons, there is no contradiction in havingjural opposites (or limits) in the same jural relation.

9. New Institutional Economics widely emphasizes the role of privatearrangements as a solution to the public arrangement failure (see Williamson1975, 1979, 1985).

10. See Vatiero (2009a).11. Sen in 1992 used choice instead of opportunity, and achievement

instead of process.12. Path dependence can be described succinctly in the following terms:

“men make their own history but they do not make it just as they please; theydo not make it under circumstances chosen by themselves, but under cir-cumstances directly encountered, given and transmitted from the past” (Marxand Engels 1935: 247). Similarly, there is a link between initial and finalpositions (Pantaleoni 1925: 60).

13. Our idea of centralization and concentration of power derives fromMarx’s (1867) distinction between centralization and concentration of capital.


14. On the endogenous outside options, see Nicita and Vatiero (2007).

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Documents

From W. N. Hohfeld to J. R. Commons, and Beyond? A “Law and Economics” Enquiry on Jural Relations