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http://ssrn.com/abstract=267719
 
 

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The Value of Waiting in Lawmaking


Francesco Parisi


University of Minnesota - Law School; University of Bologna

Vincy Fon


George Washington University - Department of Economics

Nita Ghei


Mercatus Center at George Mason University


European Journal of Law and Economics, Vol. 18, No. 2, September 2004
George Mason Law & Economics Research Paper No. 01-16

Abstract:     
This paper explores the idea that adopting a law is like investing in a productive asset. Investment involves incurring a present cost in the expectation of future benefits. Legal systems can be regarded as making investment decisions when incurring present lawmaking costs that will generate benefits over time. Lawmaking investments share, in varying degrees, three important attributes with other investment decisions. First, lawmaking costs cannot be recovered if the enacted rules prove to be ineffective or undesirable at a later time. That is, lawmaking investments are partially or completely irreversible. Second, there is often uncertainty over the future benefits of the legislation. Chosen rules may prove ineffective or changes in the social or economic circumstances may render them obsolete over time. Third, like any investment decision, timing is an issue for lawmakers to determine: lawmaking innovation or revision of current rules can be postponed. Often delays in such investment decisions come at a cost, given the forgone benefits of the investment in the immediate future. This paper focuses on the value of waiting in lawmaking, illustrating the interaction among the above factors in identifying the conditions that determine the optimal timing of legal intervention. The basic model is followed by two extensions. In the first extension, we allow for some learning and informational benefit from the immediate implementation of the new law. In a second extension, we allow for political time preference to affect the lawmaking choice.

Number of Pages in PDF File: 28

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Date posted: May 6, 2004  

Suggested Citation

Parisi, Francesco and Fon, Vincy and Ghei, Nita, The Value of Waiting in Lawmaking. European Journal of Law and Economics, Vol. 18, No. 2, September 2004; George Mason Law & Economics Research Paper No. 01-16. Available at SSRN: http://ssrn.com/abstract=267719

Contact Information

Francesco Parisi (Contact Author)
University of Minnesota - Law School ( email )
229 19th Avenue South
Minneapolis, MN 55455
United States
University of Bologna ( email )
Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy
Vincy Fon
George Washington University - Department of Economics ( email )
2115 G Street, N.W.
Monroe Hall, #366
Washington, DC 20052
United States
202-994-7580 (Phone)
202-994-6147 (Fax)
Nita Ghei
Mercatus Center at George Mason University ( email )
3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States
HOME PAGE: http://www.mercatus.org
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