Daba Coura Mbow
Currently a junior at the University of Michigan-Flint, Sami Kotob is a political science and economics dual major. With a particular interest in political economy, Sami is part of the Undergraduate Research Opportunity Program research project. In the project, Sami and a fellow student, Julia Ellis, conducted a literature review, beginning with Katharina Pistor’s Code of Capital (2019). The book examines how legal systems play a pivotal role in the creation, distribution, and maintenance of capital within society. It delves into how different legal mechanisms, such as property rights, contract laws, corporate regulations, and financial instruments, influence the flow of capital and contribute to economic inequality. Pistor’s book focuses on the ways that capital gets ‘coded’ into law, its workability, or its enforceability. The relationship between capital and law is intricate and plays a significant role in shaping economic and social dynamics within a society. The legal system influences the formation, distribution, protection, and utilization of capital. For the first part of this research project, Sami and Julia will focus on how capital is used to produce goods and services, generate income, and contribute to economic growth. It is coded predominantly in a handful of private law institutions.
Now that they have completed the literature review, Kotob and his fellow students will start to examine how AI is being codified into law or contributing to the formation of capital. The two main questions that this research will answer are: How is capital formed and how will AI get coded into the law in the future? To do this Sami and his colleagues will look at data on how patents have grown over the past 10 years and levels of investment in AI. The team will examine how AI is encoded into the law in the future. Based on the capital formation framework advanced in Pistor’s Code of Capital, the accumulation of wealth and finance will vary significantly depending on the jurisdiction, the specific area of law, and the regulatory environment. Laws governing capital and finance are often intricate due to the nature of financial transactions, the need for precise definitions, and the complexity of economic and market systems. Capital formation is a dynamic process that involves the interaction of various economic agents, including individuals, businesses, governments, and international investors. A well-functioning financial system, supportive regulatory environment, and stable macroeconomic conditions are important factors that facilitate capital formation and contribute to overall economic growth.
The evolution of capital formation has been intertwined with technological advancements, and now, with the rise of AI, a new era of transformative possibilities emerges. The integration of AI into the law in the future will likely involve a combination of legislative actions, regulatory frameworks, and technological advancements. With the rapid advancements in financial technology (fintech), significant legal challenges will emerge, such as new digital platforms, cryptocurrencies, and decentralized finance (DeFi) systems emerge. Regulators and legal experts must grapple with how existing laws apply to these innovative technologies. Artificial Intelligence (AI) has the potential to significantly impact the legal industry by enhancing efficiency, accuracy, and accessibility. To have a better understanding of the subject, during the literature review, Sami and his colleagues were able to see and analyze some case studies such as the Lehman Brothers bankruptcy case, which is a significant and well-known example of how complex financial instruments, such as mortgage-backed securities (MBS), contributed to the 2008 financial crisis and subsequent recession.
But just like any powerful technology, AI can be misused or manipulated in ways that can undermine the principles of justice and fairness in the legal domain. According to Sami, while the integration of AI into the legal field offers numerous advantages, such as accuracy, consistency, and predictive analytics, it is important to approach future adoption and growth thoughtfully and responsibly. Legal professionals should consider the ethical implications, potential biases, and the need to preserve human judgment and legal expertise in decision-making processes. A balanced approach that combines AI’s capabilities with human insight can lead to more effective and efficient legal services. In conclusion, understanding the intricate process of capital formation provides insights into the foundations of economic growth, while envisioning the integration of AI into legal frameworks offers a glimpse into a future where technology shapes the very fabric of our legal systems.