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Case Law versus Statute Law: An Evolutionary Comparison

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  • Giacomo A. M. Ponzetto
  • Patricio A. Fernandez

Abstract

Case law develops gradually through the rulings of appellate judges who have heterogeneous preferences but are partially bound by stare decisis. We show that its evolution converges toward more efficient and predictable legal rules. Since statutes do not share this evolutionary property, case law is the best system when the efficient rule is time invariant, even if the legislature is more democratically representative than individual judges are. In the presence of social change, the ideal legal system includes both legislation and judicial decisions as complementary sources of law. Our model thus explains the modern history of common law and the observed cross-country correlation between legal origins and economic outcomes. It also predicts the gradual convergence of civil law and common law toward a mixed system. (c) 2008 by The University of Chicago. All rights reserved.

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  • Giacomo A. M. Ponzetto & Patricio A. Fernandez, 2008. "Case Law versus Statute Law: An Evolutionary Comparison," The Journal of Legal Studies, University of Chicago Press, vol. 37(2), pages 379-430, June.
    • Handle: RePEc:ucp:jlstud:v:37:y:2008:i:2:p:379-430
    DOI: 10.1086/533421
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    1. Nicola Gennaioli & Enrico Perotti, 2009. "Standardized enforcement: Access to justice vs contractual innovation," Economics Working Papers 1329, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2012.
    2. Guerriero, Carmine, 2016. "Endogenous legal traditions and economic outcomes," Journal of Comparative Economics, Elsevier, vol. 44(2), pages 416-433.
    3. Anderlini, Luca & Felli, Leonardo & Riboni, Alessandro, 2020. "Legal efficiency and consistency," European Economic Review, Elsevier, vol. 121(C).
    4. Eric Hilt, 2009. "Wall Street's First Corporate Governance Crisis: The Panic of 1826," NBER Working Papers 14892, National Bureau of Economic Research, Inc.
    5. Nicola Gennaioli & Giacomo A. M. Ponzetto, 2015. "Optimally vague contracts and the law," Economics Working Papers 1410, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2017.
    6. Ang, James B. & Fredriksson, Per G., 2018. "State history, legal adaptability and financial development," Journal of Banking & Finance, Elsevier, vol. 89(C), pages 169-191.
    7. Nicola Gennaioli & Andrei Shleifer, 2008. "Judicial Fact Discretion," The Journal of Legal Studies, University of Chicago Press, vol. 37(1), pages 1-35, January.
    8. von Wangenheim Georg, 2011. "Evolutionary Theories in Law and Economics and Their Use for Comparative Legal Theory," Review of Law & Economics, De Gruyter, vol. 7(3), pages 737-765, December.
    9. James B. Ang & Per G. Fredriksson, 2017. "Statehood Experience, Legal Traditions, And Climate Change Policies," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1511-1537, July.
    10. Leonardo Felli & Alessandro Riboni & Luca Anderlini, 2007. "Statute Law or Case Law?," 2007 Meeting Papers 952, Society for Economic Dynamics.
    11. Anthony Niblett, 2013. "Case-by-Case Adjudication and the Path of the Law," The Journal of Legal Studies, University of Chicago Press, vol. 42(2), pages 303-330.
    12. Álvaro Bustos & Nuno Garoupa, 2020. "An Integrated Theory of Litigation and Legal Standards," Documentos de Trabajo 536, Instituto de Economia. Pontificia Universidad Católica de Chile..
    13. Nicola Gennaioli & Giacomo A. M. Ponzetto, 2015. "Contract Innovation and Legal Evolution under Imperfect Enforcement," Working Papers 836, Barcelona School of Economics.
    14. Guerriero, Carmine, 2016. "Endogenous legal traditions," International Review of Law and Economics, Elsevier, vol. 46(C), pages 49-69.
    15. Clark, Tom S. & Montagnes, B. Pablo & Spenkuch, Jörg L., 2022. "Politics from the Bench? Ideology and Strategic Voting in the U.S. Supreme Court," Journal of Public Economics, Elsevier, vol. 214(C).
    16. Luca Anderlini & Leonardo Felli & Alessandro Riboni, 2014. "Why Stare Decisis?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 726-738, October.
    17. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    18. Andrei Shleifer, 2010. "Efficient Regulation," NBER Chapters, in: Regulation vs. Litigation: Perspectives from Economics and Law, pages 27-43, National Bureau of Economic Research, Inc.
    19. 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.
    20. Giri Parameswaran, 2012. "Ruling Narrowly: Learning and Law Creation," Working Papers 1419, Princeton University, Department of Economics, Econometric Research Program..
    21. Patricio A. Fernandez & Giacomo A. M. Ponzetto, 2012. "Stare Decisis: Rhetoric and Substance," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 28(2), pages 313-336.
    22. Per Fredriksson & Jim Wollscheid, 2015. "Legal Origins and Climate Change Policies in Former Colonies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 309-327, October.
    23. Robin Christmann, 2014. "No Judge, No Job! Court errors and the contingent labor contract," European Journal of Law and Economics, Springer, vol. 38(3), pages 409-429, December.
    24. Anthony Niblett, 2017. "On the efficiency of the common law: an application to the recovery of rewards," European Journal of Law and Economics, Springer, vol. 43(3), pages 393-417, June.

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