A Theory of Rational Jurisprudence

Abstract

We develop a dynamic model of judge-made law, assuming judicial resources are scarce and the proper legal rule is unknown, but can be learned. Judges mechanically apply precedent in some cases to save resources. Other cases are fully investigated to reduce the chance of error. With positive probability, a rational court fails to treat like cases alike. The law converges to a mixture of efficient and inefficient rules, with the degree of inefficiency correlated with the ratio of decision to error costs. The size of each jurisprudential step depends on costs and the amount of uncertainty about the law.

Keywords: Law and Economics, Incompleteness of Law, Judge-Made Law

JEL Classification: K10, K40