On Optimal Legal Change, Past Behavior, and Grandfathering
AbstractWhen is it socially advantageous for legal rules to be changed in the light of altered circumstances? In answering this basic question here, a simple point is developed -- that past compliance with legal rules tends to reduce the social advantages of legal change. The reasons are twofold: adjusting to a new legal rule often involves costs; and the social benefits of change are frequently only incremental, only in addition to those of past compliance. The general implications are that legal rules should be more stable than would be appropriate were the relevance of past behavior not recognized, and that a policy of grandfathering, namely, of permitting noncompliance, should sometimes be employed. The analysis of these points has broad relevance, applying across legal fields, often explaining what we observe but also indicating possibilities for reform, such as in the regulation of air pollution. The analysis is related to the conventional reliance-based justification for the stability of the law, the literature on legal transitions, and economic writing on optimal legal standards.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13563.
Date of creation: Oct 2007
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Publication status: published as Steven Shavell, 2008. "On Optimal Legal Change, Past Behavior, and Grandfathering," Journal of Legal Studies, University of Chicago Press, vol. 37(1), pages 37-85, 01.
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Find related papers by JEL classification:
- K1 - Law and Economics - - Basic Areas of Law
- K2 - Law and Economics - - Regulation and Business Law
- K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
- L5 - Industrial Organization - - Regulation and Industrial Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-03 (All new papers)
- NEP-LAW-2007-11-03 (Law & Economics)
- NEP-REG-2007-11-03 (Regulation)
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