The Evolution of a Legal Rule

42 Pages Posted: 2 Apr 2008  

Anthony Niblett

University of Toronto - Faculty of Law

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: February 22, 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.

Keywords: Evolution, Legal Rule, Convergence, Tort, Contract

JEL Classification: K13, K41

Suggested Citation

Niblett, Anthony and Posner, Richard A. and Shleifer, Andrei, The Evolution of a Legal Rule (February 22, 2008). 3rd Annual Conference on Empirical Legal Studies Papers. Available at SSRN: https://ssrn.com/abstract=1114941 or http://dx.doi.org/10.2139/ssrn.1114941

Anthony Niblett (Contact Author)

University of Toronto - Faculty of Law ( email )

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Richard A. Posner

University of Chicago Law School ( email )

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Andrei Shleifer

Harvard University - Department of Economics ( email )

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HOME PAGE: http://www.economics.harvard.edu/~ashleife/

National Bureau of Economic Research (NBER)

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European Corporate Governance Institute (ECGI)

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