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The Evolution of a Legal Rule

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  • Anthony Niblett
  • Richard Posner
  • Andrei Shleifer

Abstract

The efficiency of common law rules is central to achieving efficient resource allocation in a market economy. While many theories suggest reasons why judge-made law should tend toward efficient rules, the question whether the common law actually does converge in commercial areas has remained empirically untested. We create a dataset of 465 state-court appellate decisions involving the application of the Economic Loss Rule in construction disputes and track the evolution of law in this area from 1970 to 2005. We find that over this period the law did not converge to any stable resting point and evolved differently in different states. We find that legal evolution is influenced by plaintiffs' claims, the relative economic power of the parties, and nonbinding federal precedent.

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File URL: http://www.nber.org/papers/w13856.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13856.

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Date of creation: Mar 2008
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Handle: RePEc:nbr:nberwo:13856

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  1. Nicola Gennaioli & Andrei Shleifer, 2007. "The Evolution of Common Law," Journal of Political Economy, University of Chicago Press, vol. 115, pages 43-68.
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Cited by:
  1. Luca Anderlini & Leonardo Felli & Alessandro Riboni, 2010. "Why Stare Decisis?," Levine's Working Paper Archive 661465000000000068, David K. Levine.
  2. Luca Anderlini & Leonardo Felli & Alessandro Riboni, 2008. "Statute Law or Case Law?," STICERD - Theoretical Economics Paper Series /2008/528, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Cozzi, Guido & Galli, Silvia, 2011. "Upstream innovation protection: common law evolution and the dynamics of wage inequality," MPRA Paper 31902, University Library of Munich, Germany.
  4. Rustam Romaniuc, 2012. "Judicial Dissent under Externalities and Incomplete Information," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 6(3), pages 209-224, October.
  5. Matthew C. Stephenson, 2009. "Legal Realism for Economists," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 191-211, Spring.
  6. Gennaioli, Nicola & Perotti, Enrico C, 2011. "Standardized Enforcement: Access to Justice vs Contractual Innovation," CEPR Discussion Papers 8478, C.E.P.R. Discussion Papers.
  7. 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.
  8. Niblett, Anthony, 2013. "Tracking inconsistent judicial behavior," International Review of Law and Economics, Elsevier, vol. 34(C), pages 9-20.
  9. Guido Cozzi & Silvia Galli, 2012. "Sequential R&D and Blocking Patents in the Dynamics of Growth," Working Papers 2012_02, Durham University Business School.

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