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Judges' cognition and market order

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  • Benito Arruñada

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  • Veneta Andonova

Abstract

We argue that during the crystallization of common and civil law in the 19th century, the optimal degree of discretion in judicial rulemaking, albeit influenced by the comparative advantages of both legislative and judicial rulemaking, was mainly determined by the anti-market biases of the judiciary. The different degrees of judicial discretion adopted in both legal traditions were thus optimally adapted to different circumstances, mainly rooted in the unique, market-friendly, evolutionary transition enjoyed by English common law as opposed to the revolutionary environment of the civil law. On the Continent, constraining judicial discretion was essential for enforcing freedom of contract and establishing a market economy. The ongoing debasement of pro-market fundamentals in both branches of the Western legal system is explained from this perspective as a consequence of increased perceptions of exogenous risks and changes in the political system, which favored the adoption of sharing solutions and removed the cognitive advantage of parliaments and political leaders.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 768.

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Date of creation: Jul 2004
Date of revision: Jan 2008
Handle: RePEc:upf:upfgen:768

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Web page: http://www.econ.upf.edu/

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Keywords: Legal systems; institutional development; law enforcement;

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