Ehrlich was concerned with the impact of laws on various aspects of the society. According to him the laws to be found in formal legal sources such as statutes and decided cases give only an inadequate picture of what really goes in a community for the norms govern life are only imperfectly and partially reflected in them. The positive law cannot be understood apart from the social norms of living law. The living law as discussed by Ehrlich is the inner order of associations that is the law in practice of the society as opposed to the law enforced by the state. To Ehrlich living law is that which dominates the life of the society even though it has not been put forward as a basis of argument in legal prepositions. He had minimalized the differences between law and other norms of social compulsion. The difference is relative and smaller than usually asserted because the essential compulsion behind legal no less than other social norms is social compulsion not state authority. He drew a distinction between norms of decision that correspond to that which is traditionally understood to be the laws and norms of conduct that govern societal life.
If one wants to study the living body of laws he must turn to marriage contracts, leases, contracts of purchase, wills etc.The real law consists not of prepositions but of legal institutions related by the life of the groups within society. To Enrlich a jurist should study the factory, the bank, the railroad; the great landed estate, the labor union the association of employees etc. to know the real law. The living law of society has to be sought outsider the confines of formal legal material. One learns little of actual law in factories by reading only Factory Acts, the enactments and the common law of master and servant, trade unions etc. One need to go to the factory to observe law for formal law is followed, modified, ignored and supplemented.