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Legal Process and the Discovery of Better Policies for Fostering Innovation and Growth


Henry N. Butler


George Mason University School of Law

Larry E. Ribstein (Deceased)


University of Illinois College of Law; PERC - Property and Environment Research Center

January 12, 2011

Rules for Growth: Promoting Innovation and Growth Through Legal Reform (The Kauffman Task Force on Law, Innovation, and Growth, 2011)
George Mason Law & Economics Research Paper No. 12-47
Illinois Program in Law, Behavior and Social Science Paper No. LBSS11-06
Illinois Public Law Research Paper No. 10-26

Abstract:     
Our chapter concerns how legal process can lead to efficient policies for fostering innovation and growth. Future innovation will depend at least as much on how laws are made as on a priori analyses of the optimal content of those laws. Of particular importance is whether U.S. choice of law and choice of forum rules promote an efficient market for law. Our analysis supports three suggestions for improving the law to support growth. First, the rules governing the selection of the jurisdiction whose law governs productive activity can significantly affect growth and innovation. Second, any proposal aimed at increasing growth through a change in law or legal institutions should take account of the existence of multiple jurisdictions and parties’ ability to choose the jurisdiction whose law controls their transactions.

Third, we suggest harnessing the power of jurisdictional competition among the states through a federal law enforcing contracting parties’ choice of law except to the extent states legislatively override the choice of law and regulate local transactions. We apply this analysis to several areas of the law that are critical to growth and innovation: non-competition clauses, business associations, the legal profession, internet law, insurance, property law, products liability, and franchise regulation.

Number of Pages in PDF File: 29

Keywords: Albert O. Hirschman, costs, economic variables, economically powerful, efficiency, firms, Frederick von Hayek, Gary S. Becker, Hayekian, incentives, knowledge, policymakers, political, prohibited conduct, regulatory design, share, shopping, social, society, statute, substantive, technological system

JEL Classification: K11, K12, K13, K22, K32, K41, O43

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Date posted: January 14, 2011 ; Last revised: May 16, 2014

Suggested Citation

Butler, Henry N. and Ribstein (Deceased), Larry E., Legal Process and the Discovery of Better Policies for Fostering Innovation and Growth (January 12, 2011). Rules for Growth: Promoting Innovation and Growth Through Legal Reform (The Kauffman Task Force on Law, Innovation, and Growth, 2011); George Mason Law & Economics Research Paper No. 12-47; Illinois Program in Law, Behavior and Social Science Paper No. LBSS11-06; Illinois Public Law Research Paper No. 10-26. Available at SSRN: http://ssrn.com/abstract=1739312

Contact Information

Henry N. Butler
George Mason University School of Law ( email )
3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8644 (Phone)
Larry Edward Ribstein (Deceased) (Contact Author)
University of Illinois College of Law ( email )
504 E. Pennsylvania Avenue
Champaign, IL 61820
United States
217-244-9881 (Phone)
217-244-1478 (Fax)
PERC - Property and Environment Research Center
2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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