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Judicial Fact Discretion

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  • Nicola Gennaioli
  • Andrei Shleifer

Abstract

Does it matter for the outcome of a trial who the judge is? Legal practitioners typically believe that the answer is yes, yet legal scholarship sees trial judges as predictably enforcing established law. Following Frank (1951), we suggest here that trial judges exercise considerable discretion in finding facts, which explains the practitioners’ perspective and other aspects of trials. We identify two motivations for the exercise of such discretion: judicial policy preferences and judges’ aversion to reversal on appeal when the law is unsettled. In the latter case, judges exercising fact discretion find the facts that fit the settled precedents, even when they have no policy preferences. In a standard model of a tort, judicial fact discretion leads to setting of damages unpredictable from true facts of the case but predictable from knowledge of judicial preferences, it distorts the number and severity of accidents, and generates welfare losses. It also raises the incidence of litigation relative to settlement, and encourages litigants to take extreme positions in court, especially in new and complex disputes where the law is unsettled.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12679.

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Date of creation: Nov 2006
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Handle: RePEc:nbr:nberwo:12679

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Cited by:
  1. Matthew C. Stephenson, 2009. "Legal Realism for Economists," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 191-211, Spring.
  2. Guerriero, C., 2009. "Democracy, Judicial Attitudes and Heterogeneity: The Civil Versus Common Law Tradition," Cambridge Working Papers in Economics 0917, Faculty of Economics, University of Cambridge.
  3. Deffains, Bruno & Gabuthy, Yannick & Lambert, Eve-Angéline, 2010. "Labour disputes, investment decisions and the judiciary," Labour Economics, Elsevier, vol. 17(2), pages 424-433, April.
  4. Nicola Gennaioli & Stefano Rossi, 2010. "Judicial Discretion in Corporate Bankruptcy," Review of Financial Studies, Society for Financial Studies, vol. 23(11), pages 4078-4114, November.
  5. Guerriero, Carmine, 2011. "Accountability in government and regulatory policies: Theory and evidence," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 453-469.
  6. Kirchgässner, Gebhard, 2010. "On minimal morals," European Journal of Political Economy, Elsevier, vol. 26(3), pages 330-339, September.
  7. Aspasia Tsaoussi & Eleni Zervogianni, 2010. "Judges as satisficers: a law and economics perspective on judicial liability," European Journal of Law and Economics, Springer, vol. 29(3), pages 333-357, June.
  8. Joshua Schwartzstein & Andrei Shleifer, 2009. "An Activity-Generating Theory of Regulation," NBER Working Papers 14752, National Bureau of Economic Research, Inc.

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