The Evolution of a Legal Rule

43 Pages Posted: 19 Mar 2008 Last revised: 12 Nov 2022

See all articles by Anthony Niblett

Anthony Niblett

University of Toronto - Faculty of Law; Vector Institute for Artificial Intelligence

Richard A. Posner

University of Chicago Law School; National Bureau of Economic Research (NBER)

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2008

Abstract

The efficiency of common law rules is central to achieving efficient resource allocation in a market economy. While many theories suggest reasons why judge-made law should tend toward efficient rules, the question whether the common law actually does converge in commercial areas has remained empirically untested. We create a dataset of 465 state-court appellate decisions involving the application of the Economic Loss Rule in construction disputes and track the evolution of law in this area from 1970 to 2005. We find that over this period the law did not converge to any stable resting point and evolved differently in different states. We find that legal evolution is influenced by plaintiffs' claims, the relative economic power of the parties, and nonbinding federal precedent.

Suggested Citation

Niblett, Anthony and Posner, Richard A. and Shleifer, Andrei, The Evolution of a Legal Rule (March 2008). NBER Working Paper No. w13856, Available at SSRN: https://ssrn.com/abstract=1106582

Anthony Niblett (Contact Author)

University of Toronto - Faculty of Law ( email )

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Richard A. Posner

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Andrei Shleifer

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