Growing Justice: Justice Policies and Transaction Costs

Abstract:     
This paper reviews the literature on policies aiming to improve the rule of law and the operation of a legal system. It takes a bottom up perspective of clients seeking access to justice and uses transaction costs on the market for justice as a criterion to evaluate justice policies. Most justice is created through ‘justice transactions,’ including informal help from friends, legal advice, information about law, ADR services, other forms of informal justice, and adjudication. Such transactions are seriously hampered by three major transaction cost problems, however. Justice policies include codification, setting up courts and reforming them, financing of courts, legal aid, stimulating ADR, developing rules of procedure, and regulation of the legal profession. The transaction cost perspective explains why many traditional justice policies do a poor job to increase access to justice or to diminish the costs of civil justice.

More promising justice policies enable justice to emerge bottom up, in the interactions between clients and providers of justice services. These policies focus on the information needs of disputants, low cost default procedures, choice for plaintiffs, accountability towards clients, gradual, needs-based formalization of legal relationships, and strengthening informal compliance mechanisms. Such policies are relevant for any justice system, but in particular for legal empowerment of the poor and for stimulating microjustice.

Number of Pages in PDF File: 59

Keywords: rule of law, access to justice, legal empowerment, microjustice, transaction costs, courts, legal services, ADR, codification, civil procedure reform, regulation of legal profession

JEL Classification: C78, D23, D63, D74, H11, H41, K41, K42, L14, O17

working papers series