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Overruling and the Instability of Law

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  • Nicola Gennaioli
  • Andrei Shleifer

Abstract

We investigate the evolution of common law under overruling, a system of precedent change in which appellate courts replace existing legal rules with new ones. We use a legal realist model, in which judges change the law to reflect their own preferences or attitudes, but changing the law is costly to them. The model's predictions are consistent with the empirical evidence on the overruling behavior of the U.S. Supreme Court and appellate courts. We find that overruling leads to unstable legal rules that rarely converge to efficiency. The selection of disputes for litigation does not change this conclusion. Our findings provide a rationale for the value of precedent, as well as for the general preference of appellate courts for distinguishing rather than overruling as a law-making strategy.

Suggested Citation

  • Nicola Gennaioli & Andrei Shleifer, 2007. "Overruling and the Instability of Law," NBER Working Papers 12913, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12913
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    References listed on IDEAS

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    1. Rafael La Porta & Florencio Lopez-de-Silanes & Cristian Pop-Eleches & Andrei Shleifer, 2004. "Judicial Checks and Balances," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 445-470, April.
    2. Nicola Gennaioli & Andrei Shleifer, 2007. "The Evolution of Common Law," Journal of Political Economy, University of Chicago Press, vol. 115, pages 43-68.
    3. Schwartz, Edward P, 1992. "Policy, Precedent, and Power: A Positive Theory of Supreme Court Decision-Making," Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(2), pages 219-252, April.
    4. repec:cup:apsrev:v:86:y:1992:i:02:p:323-337_08 is not listed on IDEAS
    5. Kornhauser, Lewis A, 1992. "Modeling Collegial Courts. II. Legal Doctrine," Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(3), pages 441-470, October.
    6. Spiller, Pablo T & Tiller, Emerson H, 1997. "Decision Costs and the Strategic Design of Administrative Process and Judicial Review," The Journal of Legal Studies, University of Chicago Press, vol. 26(2), pages 347-370, June.
    7. Robert Cooter & Lewis Kornhauser & David Lane, 1979. "Liability Rules, Limited Information, and the Role of Precedent," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 366-373, Spring.
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    Citations

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    Cited by:

    1. Guerriero, Carmine, 2016. "Endogenous legal traditions and economic outcomes," Journal of Comparative Economics, Elsevier, vol. 44(2), pages 416-433.
    2. Matthew C. Stephenson, 2009. "Legal Realism for Economists," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 191-211, Spring.
    3. Sergey Stepanov, 2010. "Shareholder access to manager-biased courts and the monitoring/litigation trade-off," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 270-300.
    4. Hefeker, Carsten & Neugart, Michael, 2010. "Labor market regulation and the legal system," International Review of Law and Economics, Elsevier, vol. 30(3), pages 218-225, September.
    5. Guido Cozzi & Silvia Galli, 2014. "Sequential R&D and blocking patents in the dynamics of growth," Journal of Economic Growth, Springer, vol. 19(2), pages 183-219, June.
    6. Yaniv Grinstein & Stefano Rossi, 2016. "Good Monitoring, Bad Monitoring," Review of Finance, European Finance Association, vol. 20(5), pages 1719-1768.
    7. Leonardo Felli & Alessandro Riboni & Luca Anderlini, 2007. "Statute Law or Case Law?," 2007 Meeting Papers 952, Society for Economic Dynamics.
    8. Guerriero, Carmine, 2016. "Endogenous legal traditions," International Review of Law and Economics, Elsevier, vol. 46(C), pages 49-69.
    9. repec:dau:papers:123456789/7720 is not listed on IDEAS
    10. Niblett, Anthony, 2013. "Tracking inconsistent judicial behavior," International Review of Law and Economics, Elsevier, vol. 34(C), pages 9-20.
    11. 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.
    12. Guido Cozzi & Silvia Galli, 2009. "Upstream Innovation Protection: Common Law Evolution and the Dynamics of Wage Inequality," Working Papers 2009_20, Business School - Economics, University of Glasgow.
    13. Massenot, Baptiste, 2011. "Financial development in adversarial and inquisitorial legal systems," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 602-608.
    14. 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.
    15. Miceli, Thomas J., 2010. "Legal change and the social value of lawsuits," International Review of Law and Economics, Elsevier, vol. 30(3), pages 203-208, September.

    More about this item

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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