Coding the Legal Infrastructures of Capitalism - A Conversation with Katharina Pistor

On the 9th episode of Planetary Choices, we had the pleasure of welcoming with us Katharina Pistor, Edward B. Parker Professor of Comparative Law at Columbia Law School and author of two books, The Code of Capital and The Law of Capitalism and How to Transform It. Katharina is an expert in the legal and social sciences and examines the ways in which law shapes global relations and how they, in turn, transform the law.  

Today, along with our host Hagen Schulz-Forberg, Katharina offers a comprehensive understanding of modern law in the age of capitalism and how it can be used to the advantage of the people with the right resources. 

Academic Reference: 

Katharina Pistor, Hagen Schulz-Forberg; Coding the Legal Infrastructures of Capitalism - A Conversation with Katharina Pistor. Global Perspectives XXX 2026; 7 (1): XXXX. doi: XXXXXX

This podcast was created and produced by the Research Center for New Critical Politics and Governance (CPG).

To watch the video version of this episode, please visit the link below:
https://cas.au.dk/en/cpg/podcast/mapping-the-planetary

Transcript

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Hagen: Hello! Welcome to Planetary Choices. In this episode, I'm joined by Katharina Pistor, who is Edwin B. Parker, a professor of Comparative Law at Columbia Law School, where she joined in 2001. She's had teaching positions all over the nice places in the world in Harvard Law School, Harvard Kennedy School, the Max Planck Institute for Foreign and International Law in Hamburg. She's been visiting professor at Harvard Law School, New York University School of Law, and so on and so on, including London School of Economics as well in Oxford and Tel Aviv. Katharina, you are also an elected member of the Berlin-Brandenburg Academy of Science and Humanities, a member of the European Academy of Science, and since recently, a member of the Club of Rome. You joined there in 2024. You received, together with Martin Helbig, the Max Planck Research Award on international financial regulation. And recently, I don't know when this started, but you've been co-directing for a couple of years now, the Hewlett Foundation-funded Columbia Center for Political Economy, together with Ira Fredson-Elson and Suresh Naidu. Now, all of this is just water on my mill for having you here to explain to us what the hell is going on with global governance in relation to law and where we are in connecting legal questions with questions of the economy and the future. In that direction, you're also working on a fascinating new project that you call Coded Power, together with Co-Pierre Georg, who I believe is in Frankfurt these days.

Katharina: Frankfurt Finance.

Hagen: Frankfurt Finance. Yes, so all of this to just say, first of all, welcome. Thank you for joining us here.

Katharina: Thank you so much for having me. It's really a pleasure to be here.

Hagen: That's wonderful. Let's dig in. Let's dig in. Now, Katharina, you've also been, you've given us also two major books, which you wrote yourself. You're not just in all of these panels and institutions that are so doing this great work. Check out the Columbia Center. It's really inspiring what is happening there. But also read Katharina's books, The Code of Capital, has been, I believe, for me at least, it's been a major read and really inspiring, where you dealt with the role of private law, private debt business organizations, and how they interact with the shaping of capitalism and a global capitalist order, and actually help, or help maybe the wrong word, but were co-conspirators in really, really installing an inequality, a structural inequality, which I guess is a theme throughout your book. Now, then recently you wrote The Law of Capitalism and How to Transform It, where you describe again an economic system that is deeply entrenched with an economic regime. And maybe as the last thing from me, as a student of neoliberalism, we always read about economic constitutionalism, having the idea that, yes, the economy is connected to the law, but more on a constitutional, maybe public law level. But you make a point that there's a deep combination between private law and capitalism and globalization. Could you start somewhere, pick that up somewhere and explain this to the listeners?

Katharina: Well, let me maybe start by explaining the difference between public and private law, because I'm not sure people are always that familiar with it. And there's also a debate in the literature whether the distinction is still as relevant as it might have been. So when we talk about public law, we think about the constitution, as you suggested, we're thinking about regulation. We might also be thinking about criminal law. So everything that the state does in terms of trying to direct its citizens to do certain things or not to do certain things. The constitution, of course, also empowers, gives us certain rights and creates checks and balances, but it's basically the governance structure of society that is a top-down legal order. That's public law. Simply said, my public lawyers might want to refine this. But private law is how people organize their social and economic relations with one another. So if you look into the Code Civil in France or the Big Ebe, the civil code in Germany, you will find basically default rules, mostly default rules that allow people to write their own contracts, decide how they use their property rights, organize their family affairs and inheritance. These are the core areas of private law. They are legal because we also have developed legal institutions to organize these things so that we can make legal claims and enforce them in a court of law. And what I'm arguing in the Code of Capital in particular is that these institutions of private law to which belong contract property, also the law of business organizations, bankruptcy, and property rights is also part of that is collateral law or how you can secure assets to make the creditor more secure. These areas of the law are part of the private law. And what makes them so interesting is that on the one hand, you can enforce them in a court of law. On the other hand, you can use them much more flexibly than you can use public law. You can use them and create your own transactions. You can use them and create your own business organizations and write their own charters. So you have a lot of flexibility and a lot of control over how you want to use private law.

Hagen: Yes. Well, I understood that, I think that's great. Now this when you're a naive liberal or naive believer in let's say social contract theory, then there's a certain idea that by becoming a legal person, you engage in contracts, you have a social contract, and there's equality before the law, basically, so that the society that is that is constructed through the social contract is based on an equality before the law. But you say that, well, that may be in theory, the case. But really, what is happening is that private lawyers are pushing that and there's a structural inequality as an outcome.

Katharina: Yes, I mean, equality before the law is formal equality before the law. We're not looking at how many resources you have to actually use the courts hire an attorney to defend your rights. We're only saying that in principle, everybody can use the law in a certain way and has formally speaking the same rights. And that that is that principle we can uphold. But of course, you can if you have different resources, you have different ways of using the law, you can hire the better lawyers, you can start thinking about how you can actually use these rules of the game, as they're sometimes called, and restructure the game in a way that benefits your own interests and your own purposes. And that's really the major difference that I describe. Once you understand that the rules of the game are so critical for creating wealth and inequality as a side effect, of course, then then it's really about these rules. The game is not only constrained by rules, as many economists would say. Douglas North famously basically said institutions are the rules of the game. And then we all play within these rules and then whoever is better wins. And that's fine, because if you're better, you can win. What I'm arguing, actually, within the legal system that we have created in private law, the players can change the rules of the game as the game is in motion. And that makes a difference. So which team can make these differences? Which players can get away with foul, not only get away with foul, but actually then institutionalize the foul as a new aspect of the law that they have now created.

Hagen: Okay, I get it. I think I get it. Could I just repeat this? 

Katharina: Yeah.

Hagen: There's what I meant with naïve imagination or maybe simplified imagination. So if economic constitutionalism is written to create some kind of framework within which market agency takes place, and that's all then fair game, and we all act according to the same rules. And when we do a sprint contest to each other, we don't make the other person trip over something. But you would say that's not true, or that may be in theory true again. But when I want to make this person trip, and I am one of the keeper of the codes, or I have that influence, I can re-inscribe that as part of the frame.

Katharina: Exactly. That's exactly right. So because the private law is malleable and has many advantages, because we can reorganize our private relations in many different ways. We can take advantage of new technologies. We can respond to changes in our environment. So there's lots to be said for it. But at the same time, while we are giving people the opportunities to do so, we're still upholding the principle that everybody's equal before the law. So you could do this too. You might need $25 million to make it worth your while to go to an attorney to hide your assets in the Cayman Islands to avoid taxes, right? But we don't look at that. In principle, anybody can do this, and you can create sort of legal forms that allow you to separate certain assets from your from your personal assets and let them grow in a way that the tax authorities can't touch or your creditors can't touch. There are lots of ways in which you can use the law in this way, but you also need resources to do so. Under the mantle of formal equality, we're allowing a lot of inequality to be created by strategically using the legal system to create wealth.

Hagen: Could you flesh that out? I wonder, could you maybe give an example? You mentioned the Cayman Islands and assets, and that's already a hint, I guess, of what we could look at. So if we could find, if we could illustrate that process, and then that would be very important, I think. And secondly, I wonder how large is the game? So do we play it on regional and national global level? Is it a transnational game? Could you dive into that as well?

Katharina: Yeah, in the book, in the Code of Capital, I give various examples. Let me start with one which might be most intuitive, which is intellectual property rights.

Hagen: Yeah.

Katharina: The interesting thing about intellectual property rights is that you have a patent only once the patent is registered. This is where I think it should click that these rights are bestowed on you by a legal system, by the patent officer if you want, but in accordance with the legal systems. They don't come from nature. I make the same argument also about land, but because land seems to be so physical and so real, the fact that also you require property rights to be able to sell the land is a bit harder to understand. So think about intellectual property rights, a patent. If you have a patent over a drug, you can reap the benefits from the revenue that you're making for a certain period of time that is stipulated in a patent law, 15 years, 20 years. So you have the exclusive rights to use the patent and anybody else who uses it can be stopped. You can have cease and desist orders to say, you can't use my patent or you have to get a license from me. You have to pay me to use this particular innovation. Here's the story; Angelina Jolie, the famous actress, she wrote an op-ed in 2013 in the New York Times disclosing that she had just had a double mastectomy because she was the carrier of a certain gene that can produce a very aggressive form of breast cancer. Once you have it, you're almost likely to die and her mother had it and she had herself tested and found out that she had this gene and therefore decided to have the mastectomy. She also mentioned in this op-ed that there was a lawsuit pending at the Supreme Court in the United States because there was a patent created over the sequence of the gene that you need to be able to identify who has, who's the carrier of the gene and then decide whether you want to have treatment or preventive measures of the kind that she took. What had happened is that years before, about 15 years earlier at least, there had been a race between a private company in Utah and the National Institution of Health in the United States or a group, a consortium of publicly funded research groups about finding the sequence to the patent in order to be able to diagnose patients and then do something about this. It happened that the company, the private company was first and then it went to the patent office in the United States and got it patented. Now that already was, to put it mildly, this was kind of an aggressive, it was an aggressive move because in principle we've always said that things that belong to nature that are part of our environment, and of course the genetic code should be part of that, cannot be patented, that cannot be appropriated. But the US patent law had long allowed people to patent something if there's some human manipulation, ingenuity built into this. And so they claimed that they had sort of found, done something to this, in order to find the sequences, that they should have a patent. Either way, so they had the patent created and they charged every woman who wanted to have a test, whether they were a carrier of this gene, about $3,000. And they sent cease and desist orders to doctors around the country and saying you can no longer use your self-made kit to find the patent because many doctors had tried to find, to do something similar. And so they prevented them from doing this and so made it much more expensive for most women to have the kind of test. In 2013 finally the Supreme Court struck down the patent because it said actually this is part of nature, it shouldn't have been patented, only small sliver actually involved human participation and therefore an innovation that is patentable in principle. But because the company had already created a huge database on the basis of all the tests that they had done and nobody else was able to do, that they now had a monopoly over the data. And the monopoly over the data that they protected again with legal means, trade secrecy law in principle, and said we will not share anymore. At some point they said we won't share these data anymore and you cannot touch them. So that's what I mean. You're creating, you're using the legal system, the patent law, trade secrecy law, property law generally if you want, to create monopoly rights and prevent others from using things that are essential for their well-being that in the past we would have never allowed to be patented. But lawyers had before pushed the envelope and basically said well if there's just a bit of human ingenuity we should patent it because otherwise people will no longer innovate etc. So this is by way of an example. 

Hagen: It's a very striking example which makes me think of the case of having monopolies which used to be much more contested. 

Katharina: Yes of course. I mean and we're struggling with this of course with big tech etc. How to enforce competition law more generally. Let me maybe also jump to your second question. How big is it? So I think these things can happen at the local level and they also happen at the global level. The important thing about private law is domestic law, in some jurisdictions in the United States is even below the federal system with state law. So in the United States, the state of New York, the state of Delaware, the state of Kentucky, they all have their own property law, contract law, tort law etc. What this allows is that you can pick and choose from different legal systems. The one that gives you the greatest possibilities to do stuff and because the United States is still a single country and has a provision in the constitution that says we want to have a unified or not a unified market but an integrated market. One state cannot deny the enforcement of the law of another state. So that gives you a lot of legal arbitrage opportunities to find the law that you like. And that's already in the United States just to give an example. Most big corporations are incorporated in one relatively small state, the state of Delaware. What else was there in Delaware when they started to basically become the lead in incorporation? Nothing. It was a small agricultural state. There were no big industries but also no labor unions. So there was no political contestation over the contents of corporate law. So they positioned themselves as a state that offered the corporate law that management would like because management makes the decision where to incorporate. And now these corporations are Delaware corporations but they can do business in Montana and California. They can also do business in Germany and elsewhere because we have also over time allowed principles to seep into our legal systems that say if a corporation is incorporated legally in any jurisdiction we also recognize it as a corporation in our jurisdiction. And once you do And once you do that... Where does that go? I mean is this a global phenomenon or are these bilateral agreements? It's a mix. It's actually first of all again domestic law. So every country has a set of rules. Every jurisdiction states in the United States have a set of rules that determine which legal system shall be applied if more than one is in play. So let's say if a Delaware corporation does business in New York and somebody claims it's not a corporation under New York law, why should it be recognized as a legal corporation with shareholder limited liability etc. Then under US constitutional law the state of New York cannot say if you want to be in New York you have to be a New York constitution. You cannot say that. That's constitutional law. But also New York has a set of rules that says we will basically recognize a company that is incorporated legally in a different jurisdiction in New York. Germany is an interesting case because in Germany until not too long ago the rule was if you have your seat in Germany, that is your major administration of the company, you must be incorporated in Germany. So for example if a German company buys a company from the Netherlands, thereby moves the seat of that company to Germany, the company has to be reincorporated under German law.

Hagen: Okay.

Katharina: The European Court of Justice has said you cannot do that. You can't have rules like that within the European Union because you're denying the Netherlands that their corporations will be fully accepted under German law. So there has been a tendency over time to make it easier for people to move from country to country, from jurisdiction to jurisdiction, and take their own law with them or buy into different laws by taking laws from different jurisdictions and organize their affairs in that way because they can get certain benefits. So since most countries, many countries, have allowed for example the free choice of contract law. You're in Denmark, I'm in Germany, we might decide we want to use Swiss law because we don't trust either of our legal systems. We could do this in contract law. Corporations I mentioned, I can incorporate my company in Luxembourg, maybe I'm getting some tax benefits but certainly I'm also getting a corporate law that might be more flexible than the German law with co-determination. We don't like co-determination, we just go to a neighboring jurisdiction and incorporate there. We still do business in Germany, what's wrong with that? So you can basically flout the rules that jurisdictions have established for themselves by picking and choosing from a many other jurisdictions what you want to do. You don't have to move physically, you're just sending your paperwork to a different jurisdiction. 

Hagen: That sounds easy. You mentioned the word incorporate which of course means to become a body or to certainly take physical shape which maybe not everybody understands. I find it a very interesting usage of semantics that you kind of materialize or become corporal somewhere. I can become a body in Switzerland. How does that work?

Katharina: So it has changed over time. The interesting thing is we can all do some business together without incorporation but that has certain consequences. So if we just start a business for profit, if we default or if you can't pay the debts of the firm, then the creditors of the firm can go against our personal assets. Also when we just do this without incorporating then you can manage the firm and I can manage the firm and the world around us can rely on the fact that we can both fully represent the firm but maybe we don't like this, maybe you're a better manager than I or vice versa and so we may want to have a different type of structure. So the corporation is a particular business organization that has certain legal features which are important. You can get the corporate form only today by registration because the corporate form creates features that have to be created in the law. They do not exist outside the law. It's again one of these things that one just has to accept. Originally the corporation was used under Roman law already for foundations. You could say the state is only corporation in that sense. It is an incorporated body. The business corporation goes back to the early days of colonialism. The English East Indian Company and also the Dutch East Indian Company are the first big commercial corporations that were created. They were created by royal charter in the case of England and by charter by the general estates in the in the Netherlands. And until the 19th century, early 19th century, late 19th century it varies by country, corporations required a special act of the legislature or another state administration to become incorporated. So you had to bring the charter to an official basically and say I want to incorporate this company and then they said yes or no. Then over the course of the 19th century the European jurisdictions changed course and said you can freely incorporate. You can choose for what purposes and where to incorporate as long as you comply with certain minimum requirements of the law. So you have to have a place of registration. You have to have a name. You have to have a certain structure. So if you have a board and you have shareholders and so there's certain requirements in the law. But then you can just choose to set this up. And this led to an explosion of the corporate form because many people took advantage of this because it gives you certain privileges. One of the most important ones for shareholders is limited liability. So unlike the example of a small partnership that I gave you earlier where our personal assets are in play when we do business with the limited liability our personal assets are not in play. We can invest in firms. They can create damages. They can pollute. They can do all kinds of things. But we will never ever have to pay into a pool that would make the debtors whole again. If the corporation goes under it goes under the shareholders walk away with the money that they have made earlier. 

Hagen: Well, it makes sense, if I were if I were in a position to have all that money into an interest and the ability to protect that that I would inscribe such a process into the code right. And that's kind of part of your argument that this inscription of these protective schemes or this you know keeping us safe so to say always having our assets and safe harbors and protecting our own capital our own property our own wealth through these legal means is part of the story of of western capitalism global capitalism.

Katharina: Correct. Exactly. So it started locally domestically if you want and then you transpose the same mechanism to different types of assets but also to different jurisdictions and take advantage of the opportunity to even choose a different legal system because it gives you more options to do so. 

Hagen: Fascinating. And how is this panning out globally? So how do we get the you know the global south for lack of a better term now how do we get former colonies how do we get those countries into that story? 

Katharina: So one part of the story is that colonization is also a transposition of legal systems. So every colonizing power brought its law with it and its commercial and civil codes as well. So when first of all when the English Indian company went to the subcontinent of course it also was allowed to rule people and to create rules they used credits and indebted many people and used sort of common law principles. England also codified part of the English common law which is non codified in order to transpose it to India. So there's an Indian contract act which they then, basically, wrote down what the principles of English contract law is and gave it to the Indians right under colonialism. Spain had of course colonized Latin America much earlier but when the French Napoleon civil code was transposed to Spain and Portugal then they transposed into Latin America. French West Africa has a civil code Egypt has a civil code the Ottoman Empire etc etc. So you can look at the map of the colonial empires and I can tell you which legal systems these countries have as a formal basis. During colonialism very often the law applied only to the colonizers in some of the elites. They also brought the elites back to their home country to train them as lawyers and then after colonialism most countries basically made that law their national legal system for want of anything else and because they already had been partly integrated into a capitalist system. So in that sense you know they can play with the same elements if you want but here again of course the same things are true. There are more inclined many former colonies countries in the global south emerging markets etc. They often are pushed into accepting legal practices that benefit those of course who bring those legal practices, open your borders to trade not only to trade but also to capital flows, allow full repatriation of any revenues that are being made, maybe create free economic zones which are special insulated places where we do not apply the general law of the land including the administrative regulatory or tax law but we can only do our private law arrangements and then bring stuff back into the global market. So they have participated in this game but also were forced to participate because the terms for global transactions and trade are set by those who have the better bargaining power

Hagen: So you basically we need to learn or accept that the legal foundation to have any kind of new colonial or financially colonialized agency by the western countries or by you know Wall Street the city and other places of investing and reaping the benefits of these investments are still leftovers from colonialism.

Katharina: Yeah, are leftovers from colonialism they're also being recreated and they're being reinstated. I recently was on a zoom call with a colleague from West Africa and he had a quote from a French prime minister, I'm now blanking, but who basically said we can let the colonies the territorial control go but we need monetary control

Hagen: Yes of course.

Katharina: Monetary and financial control. 

Hagen: And allow our businesses to keep going there. 

Katharina: Correct.

Hagen: Of course. And this is a practice I think we learned from, there's a book that now comes to mind by Susan Pederson called The Guardians of already in the mandate system and the League of Nations, you probably know this as well, where the Germans were very cleverly negotiating that for you know because of equal rights and protection and protection of interests and they gained the right to keep investing in their former colonies after the First World War and so the businesses would still thrive and they would. Maybe this is one of the first stories of what you describe that hey it actually, it's actually not a bad idea to move out and save the money of running the administration but being and the military cost and all that and keep the business going. 

Katharina: Yes, yes. No, I think you can see this and as you suggest this is sort of an alternative and maybe a cheaper alternative to straight colonization where it is economic and legal colonization if you want to call it that. 

Hagen: Now that's all a little depressing but in your in your new book there seems to be an optimistic tone because you say how to transform it, the law of capitalism and how to transform it. Now how does this function? Could you say this is, they're pretty powerful I would say actors these private lawyers, they're all well organized they know there's this is the law has been written so how are we going to change it?

Katharina: So yes I have to make a confession here maybe. So when I first wrote this book on the law of capitalism I didn't have how to transform it attached to it yet. And also I had actually identified the core features of capitalism as a system that in my mind operate together to always reconstitute the system. So the three features I identify is that we have very strong empowerment of individual actors including corporations so it's not about only about humans but about corporations. We have a system that yes the state has centralized the means of coercion but you have decentralized access to mobilize the means of coercion in order to protect your own interest because you can use the law in a certain way and you can also litigate strategically to get certain types of outcomes and last but not least we are tolerating and endorsing legal arbitrage which is what I described before you can pick and choose the law from different jurisdictions you can take advantage of ambiguities in the law etc etc. So with these three mechanisms I basically explained how even after major attempts to protect society from capitalism maybe during the New Deal in the United States in the 1930s or after World War II in many other jurisdictions as well it always comes back it always wears its head again and typically it uses private law to get around the constraints that we might have imposed through public law. And so I basically said there's no exit and presented this to my faculty and even my colleagues at Columbia basically said you can't write a book like this so it's too depressing so the question is how would one, so I think it's true it's maybe also too easy just to say you can't change. History changes all the time you're a historian you know right it's changes in certain structures but there's always change and quite transformative change. We  might not always like the direction but it's happening so the question is can we also mobilize it in a different direction. So for me then the key question was how do legal systems change so it's not just social change and social movements there's a lot of literature about these kind of things but my fear is that they very often fizzle out and they don't reach into the levels where the attorneys are creating the code of capital you just you just don't get to that point so you have to think about how a legal system would change and would also then stick to a particular path rather than revert back into capitalism. And I've come to the conclusion that this cannot be done by ingenious design because these high-paid lawyers in these global law firms they just know better right they're just really sophisticated so any institutional design that you come up with can be repurposed in ways that we can't even imagine when we do this. Which doesn't mean that we shouldn't try or you know impose more taxes or have some more regulation but we should also be aware of the fact that this can always be arbitraged around at least to a certain extent. 

Hagen: Just a bracket here, when you say well this is how, is it a direct confrontation or at least a pretty much, you know, all those institutionalists the John Rawls of the world and the Habermas of the world who would say we have a transcendental institution and then you know things will work out you would say that doesn't work. 

Katharina: Well I think I've become a skeptic of this because I think we have to just understand how these institutions work dynamically and who has the power to change them, it goes back to what we said at the beginning; if some can change the rules of the game as the game is in motion and it's not the ones who are democratically legitimate to do so but those who have the power to do so and have the right lawyers on their side and do this in one area of the law which however affects the others and basically can get out and under from our democratic controls because they just take the legal system from a different jurisdiction and they're done. Then this is an illusion that you can create the system within which we can have derivative rules and that they comply with certain fundamental standards that we have applied. So nonetheless I'm also, I'm kind of also ending up by saying we can have certain types of institutions that might be more conducive to a more equitable world only with a shared normative foundation and we can keep institutions the way that we want them to be only as long as we can retain a particular commitment to institutions. Which would basically say we will not enforce certain claims, you might have arbitrage around the rules and you might still be able to make a nice argument that it's still compliant with the black letter of the law, if we can do x y and z like you know patent genes you can patent genes because somehow we can make an argument. And you know what if we could just say no well if we could this is like a fundamental violation of our core principles and so I'm basically saying we have to put private law onto a normative foundation akin to our original ideas about democracy and self-governance putting humans putting the individuals at the center and also then developing the tools for them to protect themselves from actors who are trying to infringe on their on their capabilities. I use the capabilities approach but also enable them to use the law and other resources that society has to offer to live a decent life as well. So we need to reinstall.

Hagen: So that sounds like Martin Nussbaum or and Amartya Sen and these, I mean that sounds convincing and I would definitely think that's a great way forward but how, would we then  need to define what that human norm is?  

Katharina: Yes and no. I think so we do have to work in a similar direction and I think the direction has to be to put the human and human interests at the center of our also private legal system that can take different forms and different cultures. So I think both Sen and Nussbaum were very mindful of not trying to impose a universalistic western type, these are our human rights again, and I think I buy into that as well at the same time there's also been a dispute between Sen and Nussbaum in terms of saying do we actually need like a catalog of capabilities. So Sen defined a capability as you know every human having the right to live the life that she or he has reason to value it's also pretty high standard you have to have reason to value but the important aspect of the capabilities approach is it imposes an obligation on others. It's not only a negative right against the state neither is it a positive claim against the state. You have to give me x y and z so I can live but saying society has an obligation to ensure that everybody has the opportunity to live whether or not you have disabilities whether you have other you need certain things that have to be fulfilled. That claim, this is important for me, that claim could also be made let's say against a foreign corporation right because the  schizophrenia in our system right now is what we're saying the state has to do something but the state doesn't even have full control over what foreign corporations do, operate under a different charter a different bigger system in our jurisdictions and transact in financial assets which might blow up our financial system. You know you can try to regulate it's what they get around the regulations of the idea that the state can do all that it's kind of becoming increasingly an illusion. So the question is can we can  basically in some ways just take away the punch ball from the private actors who use the private law and basically say certain things that you are doing will not no longer be enforced and other things that you think you can get away with.

Hagen: But who's saying that, that would be the state?

Katharina: the courts. Of course the courts to some extent so non-enforceability would be an act of courts. It could also be done through legislation um the problem of course is in our political system right now the politics are so divided that having like a major legislation that would sort of reorder the system i think is also an illusion. Courts are you know they're sort of sometimes work sometimes don't work it depends on where you are and who's sitting on the bench and what kind of case law they have developed but I think there are some signs for hope in some kind of cases and jurisdictions that we've seen there are other signs where you know you would rather avoid going to the Supreme Court in the United States right now for example if you have an agenda like mine. So it depends, you have to think about which actors that are sitting at critical notes in the system are most likely to change or accept this notion because one of the reasons I’ve used the capabilities approach is it is fairly close to our ideas of having individual rights and of the original ideas even original liberalism right, it's close enough that many people would buy into it but it has a little Trojan horse built into it because it's not only negative it's actually positive. You have an obligation and then we have to think about how to realize these obligations these claims that you have to put me in a position so that I can do the things that I want to do and have also a right to do in my own life. And I think this would rule out many practices that have been very normalized today that corporations including the tech companies and posts on us when you think about how they organize their labor relations globally today. They should not be able to do so and of course then the questions you have to think about how you would operationalize all that which I haven't spelled out in the book I think that requires just a much more careful analysis. 

Hagen: Could you maybe for the non-legal ears and eyes of this, you mention negative and positive and you and I know that this is a big discussion we know much more about it but so negative law or negative and positive law. 

Katharina: Negative rights.

Hagen: Yeah, sure rights and positive rights they're written down? Negative rights? No? What is it?

Katharina: It's a debate in constitutional law and the question is always whether the civil and political rights that we create in our constitutions are negative rights or whether constitutions should also grant positive rights. So negative right is I have a property right and the state cannot take it away from me or if it does it has to pay compensation. I have the right to association I have the right to free speech so you can't impeach with my free speech right these are classic negative rights. Positive rights is if you write into your constitution you have a right to water you have a right to housing you have a right to work and then the question is how will the state fulfill these rights. And then there's something in between like you know the German constitution that has like a social principle built into the constitution which can be used to interpret rights and how they're being realized in relationship to others. But the positive rights especially you have this positive claim you want something from the state, the negative is just stay out of my backyard this is mine. 

Hagen: This is mine. And then what I meant with writing down is this is a dynamic function. You can claim more of these you know, the right to development has been claimed by you know nations from Africa in the 70s and 80s and so that is that will be positive rights? 

Katharina: You could say this, I mean we associate rights mostly with individuals rather than with the entire nation but it's similar. No but have a good point because I think in the 1970s there was sort of this moment where we could have gone down a very different path than we have, we could have gone down a path to enable the newly independent states the former colonies to develop their own economic policies to protect themselves from those that are being imposed from the global north and yet still benefit from some resources that rather the UN or the World Bank or the IMF might have made available to them. And to the contrary we moved into a direction that sort of I think empowered these private actors with the legal tools that they of course knew better to use and had already fully implemented. 

Hagen: Yeah. There was this moment of the new economic international world.

Katharina: Exactly. 

Hagen: And in a year it's a different, difficult to speak to the abbreviation but this is this was the moment and it faded out there was the, came I guess with a brand commission as well and there were, so just for everybody to this is the global context and we're still trying to understand what went wrong some would say it's that that was the neoliberalization also of these international the UN commissions and these  agencies and these platforms.

Katharina: But I think this is also an important point because it shows how important ideas are right.

Hagen: Thank you yes.

Katharina: Ideological shift has completely changed the system and caused opportunities that we might have had and created different reality but you know my hope is that with a new set of ideas we could also sort of shift the way we do things and if you look back to this period you can also see this was not like one big stroke. So we just didn't change the entire system from one day to the next but there was like this creeping new understanding of the world markets are efficient you know the government is the problem it's not solution as Reagan put it and this became completely normalized and if we just step back from this and say, you know, what is this, what is this all about for whom do we create these institutions these arrangements, who should flourish in the end right? And what are the institutional structures that we need and how do we have to imbue them with certain types of norms and ideas so that we can keep them on a particular path that is actually not about maximizing profits and creating trillionaires it is actually about ensuring human flourishing more widely.

Hagen: Beautiful, I couldn't agree more that there is a kind of a need for new humanism to be written into many of the normative foundations of our societies. I think this is all great and we could go on into more detailed versions here but I would like to add two more elements to the conversation which is there could be more geopolitics could be one the now the end of international waterways because people have the idea “hey I could I could tax you, I could take polls because you should this” would be the end of the international waterways. You're laughing, this seems to be a new trend now but I would love to focus more on AI or digital technologies because that's also your new project with the digital code as one element of one field which is hugely influential and fundamental. How do we deal with this new need for human basis of things when we talk about these new technologies and the second part would be, and this awareness of the planetary problems of environmental issues and the let's say the green transition. Yeah where do we start? 

Katharina: So with the digital code, because I like to think about the digital code like I think about the legal code, in fact in the Code of Capital I basically said think about the legal tools that the attorneys who code capital use, like think of it like you would think of a software code or maybe the genetic code. That's basically the core material that carries the information with which sort of future decisions are made as well. So that's what I thought about how to explain the legal coding and obviously if I already make the parallel to the software coding you know there we are. I'm not a software coder, I'm a co-author to this project with Co-Pierre Georg who is a physicist and an economist and deals with and can code digitally so I like, I can understand, you know, through him what's going on. We put our heads together and so the claim that we're making in this new project which is called Coded Power is that if you can control the formal means by which societies organize themselves you have an enormous amount of power and that's what I try to show on the Code of Capital. If you know if powerful clients with the right lawyers on their side can code the way they organize their business organizations their relationship with others and impose their will on others there are major rulers and of course the same is true with the digital code. So what has started in the 1990s with this more anarchist you know experimental mode after the internet was open, of course it came from the American military so it always had a different structure too but there was sort of this moment, again like we talked about the 1970s in the 1990s, there was this moment where people thought this is you know, it opens so many new avenues the way we could organize people's life. The kind of experimentation, the nerds who all of a sudden had their friends with whom they could do stuff on the internet and then you see like 20 years later we have monopolized platforms controlled by absolute rulers, they've organized their cooperation so they have full control so Mark Zuckerberg has only a small economic stake in Meta but he has full voting power, he has over 50 of the votes in his own name right. So they structure these things already as autocrats they use the legal tools to create autocracies and then they basically rule over anybody who comes on their platform because you can get onto the platform only if you click agree and by clicking agree you were signing lots of contracts that you never read and that are kind of structured in a way that doesn't necessarily help you, it does help the other side as you might imagine, including provisions that allow the other side to adapt the contract to future changes unilaterally without even requiring much of your own input. So you don't really know what kind of contractual obligations you have but you have them and so the digital code is of course used also the legal code to make sure that they can do with you what they're doing with you and if you start trying to go to court they might be able to defend themselves, not always, Meta just lost a lawsuit, but in this way, so this is how I think about the digital code. Of course the question then comes up is how come? How come they were able to get this control? What forces were at work and how could one change this in the future? 

Hagen: What's the relation between the legal and the digital code? 

Katharina: So I think the digital coders think just like the economist, you know, as we discussed earlier they think they can do this without the law this is a completely new world they tell us they create like crypto currencies like bitcoin and say this is you know this cannot be regulated, our own world,  just go away state, this is you know our own free world and you have these libertarians like Peter Thiel and others to write manifestos to that extent. But of course they also use the law to their own benefits they're all used corporations because they want to have limited liability, they structure their power through legal forms but they also, that's important to realize, they also use the digital code and increasingly so and I think one could think of the digital code as a possible alternative to the law. It's a way for organizing societies, it also has a lot of power built into it, it works differently, it's not the coercive powers of the state but it's manipulation of behavior directly. I mean or more indirectly if you want but it's manipulation of behavior in ways that is it is more difficult to identify for ourselves and therefore to also try to protect ourselves against right but it's a form of social ordering and I think we have to understand it as such and we have to respond to it as a power struggle. It's not just about privacy it's not only about my own individual privacy rights, that's totally naïve, but it's really a sort of a new form of social power that has emerged over the last 20 years or so. 

Hagen: Yes. I still struggle to understand quite why we were so enthusiastic about the whole thing in the night, maybe it was together with the imagination of globalization being the force of good and freedom and prosperity for all that we all believed, or many people believed I maybe I was a little more skeptical, but not really, that you know the internet and all these possibilities that were basically in the democratization of everything. 

Katharina: Yeah but it's also it's interesting you know, in the 1990s we also actually had control over our data because we all had our little personal computers with our floppy disks nobody could spy on us. We had actual physical control with that. I think the cloud changed a lot of that and we also, in the 1990s there was still this movement of you know open source so we deny the big companies the copyrights we're just writing our own codes and we do this together we also have something like Wikipedia right, that was created on the internet. What is interesting is then companies like Google come and they take Wikipedia’s knowledge commons and commercialize it, so I've seen some studies where people have basically tried to do searches on Google now it's, of course, we know in the AI world but a couple of years ago do searches if you exclude Wikipedia most of the searches you know become rather weak results. So they're free riding on, what I mean people have come together and have done things like in the commons but they I think they have been, others have taken the opportunity to then grab these assets because there was of course again the question who has control over this, who owns it and if nobody owns it can I not take it and can I get away with it? 

Hagen: So you extract, so there's a new kind of resource which is knowledge and data created by the commons, is extracted, it's a new form of extractivism, the data extractivism. 

Katharina: Yes exactly but it's the same it's the same pattern that I've seen since the enclosure of land or earlier of course but this is where I started in the Code of Capital but it's the same pattern, it's whenever you have ambiguous allocations of rights nobody knows what it is and some people make a movement that's mine I've put my labor into it I've now built fences and hedges and what. They were smart already 1986, in the US a law was passed the computer anti-fraud act which said whenever data are put on a device if somebody else tries to get into its hacking and it's punished like theft so they basically created a new property right in data but they gave it to those who control the device not those who produce them and we produce the data collectively all the time but also really collectively. But those who collect who then take them who basically harvest the data and put them on the device they have the property rights. 

Hagen: How do we change that? Well that's a longer discussion so, but maybe we can change it maybe not but it's definitely, I mean, the tensions are so stark between this naivete which is still going on because every, you're right, everybody just clicks agree and by that you give away almost your rights to your own data and they become collective good or they become common and then they become the property of somebody else which is crazy. I mean we're almost running out of time because I just see the time where we're in almost for an hour now Katharina but I would love to talk about the green law or the you know the form, the role of or the priority that we can give to non-human actors the environment in capitalism in reforming and transforming that political economy towards a more human future. 

Katharina: Yeah so I think there has been a trend, and I think it's a trend that I can understand really well, to basically bestow rights on nature in one way or another because in our, that is, so deeply coded in law and everything is about either right or you don't have a right then you also have to create rights in order to defend anything. There's nothing you can defend without having a right so you have to create it but somebody has to defend it because of course nature cannot defend itself in its human agents as corporations do so. I think that's not a problem you can create then human agencies that have to defend nature and have to defend nature's rights but what it tells you basically is you're entering, you're still entering a battle with our same basic principles. Right nature might have some stronger rights than, I don't know, certain individuals but you still have to enforce them here to still mobilize resources to enforce them. So in the current configuration of our global system I think it's a symbolic step to give nature rights and within this rights-based system where we basically says without rights you have nothing and we can do whatever with you then it makes perfect sense to do so. But I'm not sure whether given the power relations that we have also in this world and again where we have people who can change these rights and how they might be enforced or, you know, prevent others from having access to the courts and because they have to go to private arbitration or so. In that kind of world just creating a new right for something like nature I'm not sure will change the way in which the system operates and so that's one thing, the other thing, that I have issues with is this whole movement with ESG environmental social and governance, in particular the E-pod. So capitalists will of course take advantage of every opportunity to make money so there has been this relatively brief episode where environmental assets all of a sudden were the rage, everybody was investing in them and they went up right everybody has demand and they go up. But if it turns out that, you know, brown assets like coal and oil and gas are still bringing more returns they drop them like a hot potato and go somewhere else of course.

Hagen: Right.

Katharina: So the idea again that we could do a green to transition by using capitalist tools like making, creating new types of assets and labeling them it's green investment into the, that doesn't really you know comply with the logic of capitalism because the investors don't care about these issues. The investors care about their returns. So unless you can ensure that the returns are sufficiently high for them you won't make it stick, people will just move elsewhere where they can make greater returns as well. And at the same time you're creating an entire industry of labelers, you know, lawyers and accountants and other people who say this is green this is not green and then so what Adam Smith called the rentiers so we have no class of rentiers about these type of assets but I'm not sure we have made any progress in actually bringing down emissions and saving the planet which is our biggest commons right. Back to our original point, this is our commons there is no other and the Elon Musk's might shoot themselves into the into the moon, to space that's fine with me but for most of us this is the only place we have. 

Hagen: That's right. This was this was so brilliant Katharina. Let us stop here by just taking that in and well I do hear that there's a bit of the hopeful message, is that we need to take more agency that could come from the courts to inscribe a more normative approach from the courts into, well, into the code or you know so that the source of the code is normatively defined. 

Katharina: Right yeah.

Hagen: But not everything can be extracted and that could be maybe then transposed both of them, let's say human only system as well as the digitized systems of coding and maybe even then also the environmental part of it. But that means that we need to come from some form of agreement of what that norm is. We have work to do. 

Katharina: I agree. Yeah no, certainly we've got work to do. 

Hagen: Okay well, thank you so much for joining us this was fascinating. Everybody click on her books, read her stuff, follow Katharina Pistor's work and the wonderful work also of your Center at Columbia which I've only scratched the surface of all the knowledge that is coming out there. So thank you so much for joining us Katharina.

Katharina: And thank you it was a wonderful conversation have a great day. 

Hagen: You too.

Further Readings:

• Burgerliches Gesetzbuch ... Berlin, Veb Deutschen Zentralverlag, 1962.
• Duignan, Brian. The U.S. Constitution and Constitutional Law. New York: Britannica Educational Pub. in association with Rosen Educational Services, 2013.
• Habermas, Jürgen. “Introduction Au Texte de J. Habermas.” Cités N° 89, no. 1 (February 21, 2022): 151–52. https://doi.org/10.3917/cite.089.0151.
• Halperin, Jean-Louis. The French Civil Code. Taylor & Francis, 2021.
• Mitterand, Francois, Michel Debre, and Giscard d’Estaing. “President Mitterrand on Population Policy in France.” Population and Development Review 7, no. 3 (September 1981): 568. https://doi.org/10.2307/1972588.
• North, Douglass C. “Institutions.” Journal of Economic Perspectives 5, no. 1 (February 1991): 97–112. https://doi.org/10.1257/jep.5.1.97.
• Pedersen, Susan. The Guardians: The League of Nations and the Crisis of Empire. Oxford: Oxford University Press, 2015.
• Pistor, Katharina. The Code of Capital : How the Law Creates Wealth and Inequality. Princeton: Princeton University Press, 2019.
• Pistor, Katharina. The Law of Capitalism and How to Transform It. Yale University Press, 2025.
• Rasmussen, Hjalte. The European Court of Justice. Copenhagen Gadjura, 1998.
• Rawls, John. Political Liberalism. New York: Columbia University Press, 1993.
• Reagan, Ronald. “Inaugural Address 1981.” Ronald Reagan Presidential Library & Museum, January 20, 1981. https://www.reaganlibrary.gov/archives/speech/inaugural-address-1981.
• Sen, Amartya. “Journal of Human Development and Capabilities: A Multi-Disciplinary Journal for People-Centered Development the Ends and Means of Sustainability,” 2013. https://doi.org/10.1080/19452829.2012.747492.
• Smith, Adam. The Wealth of Nations. London: W. Strahan and T. Cadell, 1776.
• Staff, TIME. “Angelina Jolie’s Double Mastectomy: What We Know about BRCA Mutations and Breast Cancer.” TIME. Time, May 14, 2013. https://time.com/archive/7136131/angelina-jolies-double-mastectomy-what-we-know-about-brca-mutations-and-breast-cancer/.
• Stewart, Frances. “Nussbaum on the Capabilities Approach.” Journal of Human Development and Capabilities 14, no. 1 (February 2013): 156–60. https://doi.org/10.1080/19452829.2013.762175.
• Thiel, Peter. “Peter Thiel. Un Pessimisme Visionnaire.” Philosophie Magazine N° 94, no. 11 (November 1, 2015): 39–39. https://doi.org/10.3917/phimag.094.0025.