Whither Arbitration?

Abstract

Over the past several decades, scholars and policymakers have debated the future of arbitration in the United States. Those debates have taken on new significance in the present Congress, which is considering a variety of reform proposals. Among the most widely watched are ones that would prohibit the enforcement of predispute arbitration clauses in employment, consumer and franchise contracts. Reviewing the available empirical literature, the paper explains how many of the assumptions driving the arbitration reform debate are unproven at best and flatly wrong at worst. It then tries to sketch out the economic impact of any move by Congress to limit arbitration in certain fields. The effect, I submit, would be to harm the very consumers and employees whom Congress is trying to protect. While arbitration certainly can be refined on the edges and more empirical research needs to be done, advocates for reform simply have not made their case.

Keywords: Arbitration, Alternative Dispute Resolution, ADR, Contracts

JEL Classification: K30