The Evolution of a Legal Rule
University of Toronto - Faculty of Law
Richard A. Posner
University of Chicago Law School; National Bureau of Economic Research (NBER)
Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
February 22, 2008
3rd Annual Conference on Empirical Legal Studies Papers
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.
Number of Pages in PDF File: 42
Keywords: Evolution, Legal Rule, Convergence, Tort, Contract
JEL Classification: K13, K41
Date posted: April 2, 2008
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