On the Financial Business Cycle Theory of J. R. Commons: Institutional Economics of Incorporeal Property and Intangible Property

Abstract:

The perspective of a legal political economy was a main feature of J. R. Commons’ Institutional Economics. He interpreted the development of a capitalist economy as the evolution of legal institutions. The most important legal institutions supporting a capitalist economy are property rights. The definition of property has been enlarged from corporeal property to include incorporeal property and intangible property. Commons contrasts the law of incorporeal property with that of intangible property. He argues two quite opposite economic relationships: one is the creditor‐debtor relationship and the other is the seller‐buyer relationship. This study argues Commons’ financial business cycle theory using these two opposite concepts of property.

Keywords::

• incorporeal property
• intangible property
• goodwill
• negotiability
• business cycle

JEL Classification Codes::

• B25
• B52
• E32

Notes

1 This study is inspired by the argument of Post‐Keynesian Institutionalism. See Charles Whalen (2012) for more on this argument.

2 For the perspective of a legal political economy, see Warren Samuels (1989). I employ the term “legal political economy” to make a distinction from “law and economics” in the new institutional economics.

3 On property rights, see A. Allan Schmid (1999).

4 Sir Joshua Child was an English merchant and politician. He was the great English proponent of mercantilism and Governor of the East India Company.

5 Not all negotiable incorporeal property could be transformed into intangible property. For example, demand deposits cannot be transformed into intangible property.

6 On the debt‐deflation theory, see Irving Fisher (1933).

7 For Commons’ similarity with Keynes on money, see Tymoigne (2003).

8 This proposal is succeeded by the Modern Money Theory. On this subject, see Wray (2014).

9 As the theory of Commons on money and credit is that of incorporeal property and intangible property, it is closely connected with the goodwill of going concern. Therefore, it is closely connected with his theory of industrial relations. On this point, see Whalen (1993).

Additional information

Notes on contributors

Tokutaro Shibata

Tokutaro Shibata is a professor of Economics at Teikyo University, Tokyo, Japan. The author gratefully appreciates the comments of Ryuichiro Terakawa, Charles J. Whalen and two anonymous referees and the JEI editor's help on this article. Any remaining errors are the author's own.