Legal efficiency and consistency

The Tragedy of the Judiciary: An Inquiry into the Economic Nature of Law and Courts, 2019

This Article explores the economic nature of law and courts as an explanation for the world's endemic court congestion problem. The economic theory of goods and services is used to demonstrate that law has a dual nature-coercion and compliance-and that law as coercion is actually a club good that requires a complementary good to be useful, courts. But because courts are private goods in nature, the bundled product will behave as a private good. However, the unrestricted implementation of access-to-justice policies with the objective of increasing the people's access to courts will transform the bundled product into a common pool resource. The counterintuitive result of this transformation is that granting unrestricted access to justice might actually prevent people from accessing their rights-the tragedy of the judiciary. Two policy implications are explored: The importance of legal certainty for the tragedy mitigation, and the potentially adverse selection problem resulting from court congestion.

Encyclopedia of Law and Economics

This is an entry for the forthcoming Second Edition of the Encyclopedia of Law and Economics (2d ed., Francesco Parisi and Richard Posner eds.). This essay reviews the origins and development of the debate over the "efficiency of the common law hypothesis." The essay begins with the earliest explanation for the observed tendency of the common law as proffered by Richard Posner. It then examines the Rubin-Priest and contemporary models of demand-side models of common law efficiency and critiques thereof. It then turns to a supply-side analysis of the efficiency of the common law hypothesis, focusing on the nature of the constraints imposed on common law judges and changes in those constraints over time. This essay also examines public choice analysis of the efficiency of the common law and the Austrian economics critique of the standard neoclassical model of analysis.

2011

We argue that economics – as the scientific method of analyzing trade-offs – can be helpful (and may even be indispensable) for assessing the trade-off between intergenerational and intragenerational justice. Economic analysis can delineate the “opportunity set” of politics with respect to the two normative objectives of inter- and intragenerational justice, i.e. it can describe which outcomes are feasible in achieving the two objectives in a given context, and which are not. It can distinguish efficient from inefficient uses of instruments of justice. It can identify the “opportunity cost” of attaining one justice to a higher degree, in terms of less achievement of the other. We find that, under very general conditions, (1) efficiency in the use of instruments of justice implies that there is rivalry between the two justices and the opportunity cost of either justice is positive; (2) negative opportunity costs of achieving one justice exist if there is facilitation between the two ...

Economic outcomes are deeply influenced by the set of institutions used to aggregate the citizens' preferences over the harshness of punishment, i.e., the legal tradition. I show that while under common law appellate judges' biases offset one another at the cost of legal uncertainty, under civil law the legislator chooses certain legal rules that are biased only when he favors special interests, i.e., when preferences are sufficiently heterogeneous and/or political institutions are sufficiently inefficient. Therefore, common law can produce better economic performance only under this scenario. To test this prediction, I construct a novel measure of legal traditions for 49 transplants, many of which reformed the transplanted institutions, and develop an instrumental variables approach dealing with the endogeneity of both legal and political institutions. The evidence confirms the model's empirical implication and stresses the relevance of distinguishing between proxies measuring only the technological efficiency of the law and those picking up also the citizenry's satisfaction with the cultural content of legal rules.

International Review of Law and Economics, 2003

SSRN Electronic Journal, 2000

We argue that in the development of the Western legal system, cognitive departures are the main determinant of the optimal degree of judicial rule-making. Judicial discretion, seen here as the main distinguishing feature between both legal systems, is introduced in civil law jurisdictions to protect, rather than to limit, freedom of contract against potential judicial backlash. Such protection was unnecessary in common law countries, where free-market relations enjoyed safer judicial ground mainly due to their relatively gradual evolution, their reliance on practitioners as judges, and the earlier development of institutional checks and balances that supported private property rights. In our framework, differences in costs and benefits associated with self-interest and lack of information require a cognitive failure to be active.

Choices, Values, and Frames

An important idea, which characterizes law in society, is a reluctance to move from the status quo. In general, one can argue that legal institutions and legal doctrine are not engaged in the redistribution of wealth from one party to another. This paper explores a possible explanation for that principle. The authors' research suggests that, across a wide range of entitlements and in a variety of contexts, individuals value losses more than foregone gains. The paper argues, as a matter of efficiency, that law and social policy might have developed in a manner consistent with this valuation disparity. Furthermore, this valuation disparity can be transformed into conceptions of fairness, and, as a matter of fairness, legal decisions might have developed in a manner consistent with this fairness norm. In the first part of the paper, the economic and psychological research on the valuation disparity is described in detail. The paper then examines a series of legal doctrines, all of which can be explained by the valuation disparity phenomenon revealed in the experimental data. Cohen and Knetsch conclude that the behaviour of legal institutions and actors can be explained by thevaluation disparity.

Amongst the social sciences, it is economics that has made the most promising advances for law. There are several reasons for this: it has a well-developed theoretical framework (microeconomics); it provides currently the most advanced application of the rational choice model, which is one of the elements unifying the social sciences; it has given rise to applications in all fields of law and its scientific literature continues to grow at a rapid pace fed by new generations of scholars taking over from the founders. Two remarkable discoveries have fired the interest of lawyers in this approach. The first is that, in studying different institutions that are part of American common law in this light, researchers found that nearly all of the rules looked formulated as if the purpose was to maximise social welfare, the target value to be maximised in economic analysis. The second, related discovery is that rules formulated as if aimed at maximising social welfare, called efficient in economic parlance, often correspond to what lawyers’ intuition would consider fair or just rules. These findings are no less relevant outside the United States, in civil law systems as well as in other common law systems. Law practice asks what legal rules are applicable to a given case, how rules hang together consistently and, possibly, what rule would be desirable. Law and economics asks what are the social effects of the applicable rules, and looks for their justification and desirability in terms of those effects. In a nutshell, that is the difference between the two but also their complementarity.

Oxford Handbooks Online

In the analysis of judicial behavior, “economics” has multiple meanings. Some studies emphasize the economic consequences of judicial decisions while others employ the concepts and tools of economic analysis to explain those decisions. Here we focus on studies proceeding from the assumption of rationality (regardless of their methodological approach). Even with this limited focus, the range of substantive topics is impressive. There are many ways to splice and dice them but six stand out: (1) the judge: motivations, careers and performance; (2) selection and retention of judges; (3) opinions and precedent; (4) collegial courts; (5) the hierarchy of justice; and (6) external actors. For each we synthesize the literature and offer directions for future work.