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Overruling and the Instability of Law

  • Nicola Gennaioli
  • Andrei Shleifer

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.

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File URL: http://www.nber.org/papers/w12913.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12913.

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Date of creation: Feb 2007
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Publication status: published as Gennaioli, Nicola & Shleifer, Andrei, 2007. "Overruling and the instability of law," Journal of Comparative Economics, Elsevier, vol. 35(2), pages 309-328, June.
Handle: RePEc:nbr:nberwo:12913
Note: LE
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  1. 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 347-70, June.
  2. Gennaioli, Nicola & Shleifer, Andrei, 2007. "The Evolution of Common Law," Scholarly Articles 3451305, Harvard University Department of Economics.
  3. La Porta, Rafael & Lopez-de-Silanes, Florencio & Pop-Eleches, Cristian & Shleifer, Andrei, 2004. "Judicial Checks and Balances," Scholarly Articles 3451311, Harvard University Department of Economics.
  4. 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 219-52, April.
  5. 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.
  6. Kornhauser, Lewis A, 1992. "Modeling Collegial Courts. II. Legal Doctrine," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(3), pages 441-70, October.
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