The Value of Waiting in Lawmaking

28 Pages Posted: 6 May 2004

See all articles by Francesco Parisi

Francesco Parisi

University of Minnesota - Law School; University of Bologna; University of Miami, School of Law

Vincy Fon

George Washington University - Department of Economics

Nita Ghei

affiliation not provided to SSRN


This paper explores the idea that adopting a law is like investing in a productive asset. Investment involves incurring a present cost in the expectation of future benefits. Legal systems can be regarded as making investment decisions when incurring present lawmaking costs that will generate benefits over time. Lawmaking investments share, in varying degrees, three important attributes with other investment decisions. First, lawmaking costs cannot be recovered if the enacted rules prove to be ineffective or undesirable at a later time. That is, lawmaking investments are partially or completely irreversible. Second, there is often uncertainty over the future benefits of the legislation. Chosen rules may prove ineffective or changes in the social or economic circumstances may render them obsolete over time. Third, like any investment decision, timing is an issue for lawmakers to determine: lawmaking innovation or revision of current rules can be postponed. Often delays in such investment decisions come at a cost, given the forgone benefits of the investment in the immediate future. This paper focuses on the value of waiting in lawmaking, illustrating the interaction among the above factors in identifying the conditions that determine the optimal timing of legal intervention. The basic model is followed by two extensions. In the first extension, we allow for some learning and informational benefit from the immediate implementation of the new law. In a second extension, we allow for political time preference to affect the lawmaking choice.

Suggested Citation

Parisi, Francesco and Fon, Vincy and Ghei, Nita, The Value of Waiting in Lawmaking. European Journal of Law and Economics, Vol. 18, No. 2, September 2004, George Mason Law & Economics Research Paper No. 01-16, Available at SSRN:

Francesco Parisi (Contact Author)

University of Minnesota - Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

University of Bologna ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100

University of Miami, School of Law ( email )

Vincy Fon

George Washington University - Department of Economics ( email )

2115 G Street, N.W.
Monroe Hall, #366
Washington, DC 20052
United States
202-994-7580 (Phone)
202-994-6147 (Fax)

Nita Ghei

affiliation not provided to SSRN

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