We argue that in the development of the Western legal system, cognitive departures are the main determinant of the optimal degree of judicial rule-making. Judicial discretion, seen here as the main distinguishing feature between both legal systems, is introduced in civil law jurisdictions to protect, rather than to limit, freedom of contract against potential judicial backlash. Such protection was unnecessary in common law countries, where free-market relations enjoyed safer judicial ground mainly due to their relatively gradual evolution, their reliance on practitioners as judges, and the earlier development of institutional checks and balances that supported private property rights. In our framework, differences in costs and benefits associated with self-interest and lack of information require a cognitive failure to be active.
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number
1098.
Find related papers by JEL classification: K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General N40 - Economic History - - Government, War, Law, and Regulation - - - General, International, or Comparative O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
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