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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 La Porta & Florencio Lopez-de-Silanes & Cristian Pop-Eleches & Andrei Shleifer, 2004. "Judicial Checks and Balances," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(2), pages 445-470, April.
  2. 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.
  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. Robert Cooter & Lewis Kornhauser & David Lane, 1979. "Liability Rules, Limited Information, and the Role of Precedent," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 366-373, Spring.
  5. 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.
  6. 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.
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Cited by:
  1. 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).
  2. Guido Cozzi & Silvia Galli, 2014. "Sequential R&D and blocking patents in the dynamics of growth," Journal of Economic Growth, Springer, vol. 19(2), pages 183-219, June.
  3. Thomas J. Miceli, 2008. "Legal Change and the Social Value of Lawsuits," Working papers 2008-34, University of Connecticut, Department of Economics.
  4. Niblett, Anthony, 2013. "Tracking inconsistent judicial behavior," International Review of Law and Economics, Elsevier, vol. 34(C), pages 9-20.
  5. Massenot, Baptiste, 2011. "Financial development in adversarial and inquisitorial legal systems," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 602-608.
  6. 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.
  7. Matthew C. Stephenson, 2009. "Legal Realism for Economists," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 191-211, Spring.
  8. 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.
  9. Luca Anderlini & Leonardo Felli & Alessandro Riboni, 2010. "Why Stare Decisis?," Levine's Working Paper Archive 661465000000000068, David K. Levine.

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