The Political Economy of Court-Based Regulation

Abstract

With the rise of the modern state came increasing demands on the state to provide justice – to regulate the risks individual citizens increasingly present to one another, to ensure that contracts are enforced, or to ensure that individual respect each others’ fundamental civil rights – and much of law can be seen as political decisions about whether and how to satisfy these demands. Over the last two decades, political scientists and economists have become increasingly aware that courts have become active participants in this process. Rather than delegate enforcement to administrative agencies, which Congress may fear because of agency capture or agency drift, Congress has increasingly crafted statutes – especially those on controversial subjects – that create private rights of action. In so doing, Congress bypasses the traditional regulatory enforcement apparatus and instead makes individuals the enforcers of their statutory rights and courts the forum for enforcing regulatory rights. But the courts also act as regulators through the exercise of their traditional common law powers. Choices to adopt new theories of liability or relaxing causation requirements, for example, are driven by courts’ perceptions about the gap between governmentally provided and socially demanded levels of risk regulation, and this demand is transmitted to the courts through individual decisions to litigate. When courts act as a forum for rights-enforcement, they play a part of the role that an agency would normally play. Under this new model of regulation, courts use their normal interpretive role to fill in the gaps left in the statutes, a policymaking role that would traditionally be delegated by statute to an administrative agency. This contribution explores these push and pull pressures, which combine to create a robust regulatory role for the courts.

Keywords: adversarial legalism, public choice