Law professor Katharina Pistor (Columbia Law School) sees the legal system and the regulatory framework as prerequisites for the creation and protection of wealth. Her central thesis is that capitalism is not primarily an economic system, but a deeply rooted legal order shaped by legislation, legal interpretation and the application of law.
On 20 October 2026, she presented her book The Law of Capitalism and How to Transform It at the House of Finance at Goethe University Frankfurt. The book is now also available in German under the title Das Gesetz des Kapitalismus und wie wir es überwinden können.
Research at the intersection of law and the financial system
Pistor’s pioneering work has made a significant contribution to our understanding of the legal foundations of economic systems and established the connection between law and financial economics as a distinct field of research. This field now is central to the work of LawFin and SAFE. Ulrich Bindseil (Frankfurt School of Finance & Management and SAFE) joined the event as a discussant, while Tobias Tröger (SAFE and LawFin) moderated the discussion.
While the German book title speaks of overcoming capitalism, the English title refers to transforming it. Pistor made clear that she was not advocating socialism, but rather “a market economy that does not rely on legal steroids.” Legal steroids, such as limited liability, a central institution of corporate law, too often make it possible to privatise profits while leaving society to bear the associated social and environmental costs.
Transforming capitalism or overcoming it?
According to Pistor, capitalism does not need to be overcome; instead, the social market economy needs to be renewed. Profit motives should not be the sole deciding factor, particularly in fundamental areas of life such as housing, healthcare and education. Basic questions concerning ownership, responsibility and distribution need to be reconsidered. “I believe we need utopias,” she said.
For Pistor, this gives rise to the central contradiction of our time: if economic power is created and secured by law, why do democratic societies find it so difficult to align the rules more closely with the common good? Many legal structures increasingly favour the interests of large asset holders. At the same time, social and environmental crises are intensifying. Society, Pistor said, must therefore renegotiate the purposes that law and the economy are meant to serve.
Law and regulation are constantly evolving
Pistor sees the legal system as a public social resource that is nevertheless used and shaped to serve the interests of powerful capital holders. Assets are created through legal coding, which transforms goods, claims and ideas into capital in the first place. A house, for example, only becomes a tradable asset through legally protected property rights. Legal coding is constantly evolving and adapting. One lesson from the crises of the 1920s and 1930s, she noted, is “that unfettered capitalism leads to crises.”
Yet even under the more heavily regulated post-war order, ways were found to circumvent restrictions, including capital controls. The liberalisation of law, the expansion of the shadow banking sector and new financial instruments contributed to the erosion of this order and helped pave the way for the 2008 financial crisis.
Pistor: We must “put private law on a new normative foundation”
A historical perspective reveals a recurring problem, according to Pistor: crises are followed by legal constraints, but these always leave loopholes. Companies, investors and lawyers exploit these gaps to circumvent restrictions through new legal and economic arrangements. In her view, we have once again reached a point at which the legal order that has evolved over time no longer serves the interests of people. To address the crises of our time, “we need a shared normative foundation” based on which we can “put private law on a new normative foundation,” Pistor explained, outlining her goal.
Ulrich Bindseil emphasised that, in many respects, he could “relate one-to-one” to Pistor’s analysis based on his practical experience. At the same time, he placed greater emphasis on how regulation emerges and on the growing complexity of the financial system. This complexity gives established and well-organised interest groups an advantage in shaping rules, meaning that regulation is not only circumvented but can sometimes also be designed in ways that serve the interests of those being regulated.
Coded power: Reclaiming democratic control over law and data
Bindseil also pointed to the strong focus of Pistor’s analysis on the US experience. Pistor argued, however, that many of the same developments could also be observed in Europe, albeit with a time lag of ten to twenty years. At the same time, the question remained open as to how far this diagnosis could be applied to Europe, given its different legal traditions and shifting geopolitical landscape. Against the backdrop of an increasingly fragmented global economy, legal and economic orders may also diverge more sharply in the future. Bindseil added that Europe must currently consider what political and regulatory responses are needed to address its ongoing weakness in economic growth.
In closing, Pistor turned to an area in which the economic dynamism of the United States is particularly evident today: the digital economy. Her focus here is on digital code. While jurists and lawyers shape the legal rules governing social life, technology companies are increasingly laying down technical rules through algorithms and digital infrastructures. To reclaim democratic control over law and data, neither legal code nor digital code should be designed to serve the interests of a small number of private actors.
