Optimal Discretion in the Application of Rules

Posted: 16 Jun 2008

See all articles by Steven Shavell

Steven Shavell

Harvard Law School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: Spring 2007


Discretion is examined as a feature of the design of rule-guided systems. That is, given that rules have to be administered by some group of persons, called adjudicators, and given that their goals may be different from society's (or a relevant organization's), when is it socially desirable to allocate discretionary authority to the adjudicators and, if so, to what extent? The answer reflects a tradeoff between the informational advantage of discretion—that adjudicators can act on information not included in rules—and the disadvantage of discretion—that decisions may deviate from the desirable because adjudicators' objectives are different from society's. The control of discretion through limitation of its scope, through decision-based payments to adjudicators, and through the appeals process, is also considered.

Keywords: D8, K4, K40

Suggested Citation

Shavell, Steven, Optimal Discretion in the Application of Rules (Spring 2007). American Law and Economics Review, Vol. 9, Issue 1, pp. 175-194, 2007, Available at SSRN: https://ssrn.com/abstract=1145986 or http://dx.doi.org/10.1093/aler/ahm004

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