The Invisible Hand of Law: Review Article of Legal and Political Foundations of Capitalism (2025) by Jamee K. Moudud and The Law of Capitalism and How to Transform It (2025) by Katharina Pistor

Abstract This review article brings out a theme that connects two recent books, Legal and Political Foundations of Capitalism: The End of Laissez Faire? by Jamee K. Moudud (2025) and The Law of Capitalism and How To Transform It by Katharina Pistor (2025), both of which build on old institutionalism and legal realism, and contribute to contemporary ‘law and political economy’ scholarship. The shared concern of both authors is to come to grips with the ‘invisible hand of law’ or, more broadly speaking, to navigate interactions of visible and invisible hands with regard to state, law, and market. While there is much intellectual common ground between the two, their assessments of the dynamics of law differ and each contributes from a distinctive point of view to the scholarly debate. On a more general level, this article identifies three variants of the invisible hand of law: invisible government by private actors, the state’s legal support of private government, and the evolutionary dynamics of private law. These three variants of the invisible hand of law relate to arguments, in which individual self-interest is said to lead to beneficial macro-level outcomes by way of an unexpected or hidden mechanism ‘turning vice into virtue’. However, along with Moudud and Pistor and against the backdrop of broader accounts of the unintended effects of individual rational action, this article emphasizes that, in reality, there are often reverse outcomes, or effects that rather consolidate existing constellations of economic power, inequality, and unsustainability.