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Overruling and the Instability of Law

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  • Nicola Gennaioli
  • Andrei Shleifer

Abstract

We investigate the evolution of common law under overruling, a system of precedent change in which appellate courts replace existing legal rules with new ones. We use a legal realist model, in which judges change the law to reflect their own preferences or attitudes, but changing the law is costly to them. The model's predictions are consistent with the empirical evidence on the overruling behavior of the U.S. Supreme Court and appellate courts. We find that overruling leads to unstable legal rules that rarely converge to efficiency. The selection of disputes for litigation does not change this conclusion. Our findings provide a rationale for the value of precedent, as well as for the general preference of appellate courts for distinguishing rather than overruling as a law-making strategy.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12913.

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Date of creation: Feb 2007
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Publication status: published as Gennaioli, Nicola & Shleifer, Andrei, 2007. "Overruling and the instability of law," Journal of Comparative Economics, Elsevier, vol. 35(2), pages 309-328, June.
Handle: RePEc:nbr:nberwo:12913

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  1. Rafael LaPorta & Florencio Lopez-de-Silane & Cristian Pop-Eleches & Andrei Shleifer, 2003. "Judicial Checks and Balances," NBER Working Papers 9775, National Bureau of Economic Research, Inc.
  2. Robert Cooter & Lewis Kornhauser & David Lane, 1979. "Liability Rules, Limited Information, and the Role of Precedent," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 366-373, Spring.
  3. Spiller, Pablo T & Tiller, Emerson H, 1997. "Decision Costs and the Strategic Design of Administrative Process and Judicial Review," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 26(2), pages 347-70, June.
  4. Schwartz, Edward P, 1992. "Policy, Precedent, and Power: A Positive Theory of Supreme Court Decision-Making," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 8(2), pages 219-52, April.
  5. Nicola Gennaioli & Andrei Shleifer, 2007. "The Evolution of Common Law," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 115, pages 43-68.
  6. Kornhauser, Lewis A, 1992. "Modeling Collegial Courts. II. Legal Doctrine," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 8(3), pages 441-70, October.
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Cited by:
  1. Guido Cozzi & Silvia Galli, 2012. "Sequential R&D and Blocking Patents in the Dynamics of Growth," Working Papers 2012_02, Durham University Business School.
  2. Carsten Hefeker & Michael Neugart, 2009. "Labor Market Regulation and the Legal System," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 200915, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  3. Anderlini, Luca & Felli, Leonardo & Riboni, Alessandro, 2011. "Why Stare Decisis?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8266, C.E.P.R. Discussion Papers.
  4. Niblett, Anthony, 2013. "Tracking inconsistent judicial behavior," International Review of Law and Economics, Elsevier, Elsevier, vol. 34(C), pages 9-20.
  5. Guido Cozzi & Silvia Galli, 2009. "Upstream Innovation Protection: Common Law Evolution and the Dynamics of Wage Inequality," Working Papers, Business School - Economics, University of Glasgow 2009_20, Business School - Economics, University of Glasgow.
  6. Guerriero, C., 2009. "Democracy, Judicial Attitudes and Heterogeneity: The Civil Versus Common Law Tradition," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0917, Faculty of Economics, University of Cambridge.
  7. Massenot, Baptiste, 2011. "Financial development in adversarial and inquisitorial legal systems," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 602-608.
  8. Thomas J. Miceli, 2008. "Legal Change and the Social Value of Lawsuits," Working papers, University of Connecticut, Department of Economics 2008-34, University of Connecticut, Department of Economics.
  9. Matthew C. Stephenson, 2009. "Legal Realism for Economists," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 23(2), pages 191-211, Spring.

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