The “legal families” theory of corporate law and ownership structures pioneered by Rafael La Porta, Florencio Lopez-deSilanes, Andrei Shleifer, and Robert Vishny provides one of the most influential accounts of why “law matters” in shaping economic organization and outcomes. However, the empirical bases and theoretical logic of the theory contain serious flaws and limitations. First, as has been pointed out by a number of critics engaged in this revision, the legal origins literature contains numerous problematic characterizations of substantive law that expose the serious problems of quantitative operationalization of legal rules as a mode of comparative legal analysis. Second, the econometrics analysis of broad, cross-national patterns of legal and financial system characteristics departs from the theoretical and practical concerns of law as an academic and professional discipline focused on intra-systemic behavior. Third, the legal families theory is essentially an underspecified, path-dependent account of political economic development that is, at the very least, in logical tension with observable changes in law and financial system structures of both the past and present. Fourth, the methodology does not adequately distinguish between countries in which the rule of law and functional political and legal institutions are well-established (generally the advanced industrial countries) and those in which they are not (generally less developed countries (LDCs), often with significant post-colonial legacies). Given these flaws in, and limitations of, the legal families theory, the intuitively appealing thesis that law matters must be resituated in a more empirically persuasive and historically sensitive account of the relationship between law and politics. I speculate that any meaningful correlation between legal origins and economic outcomes is the product of politics in the first instance rather than law, and that legal families likely function as a proxy for different forms of political economic organization
