Legal Cycles and Stabilization Rules

The Timing of Lawmaking, Frank Fagan & Saul Levmore (eds.) Edward Elgar Ltd., 2017

21 Pages Posted: 4 Oct 2017 Last revised: 14 Nov 2018

Date Written: October 2, 2017

Abstract

Just as the economy fluctuates and presents the pattern of business cycles, rules fluctuate and present the pattern of legal cycles. More importantly, the identification of legal cycles permits the lawmaker to respond with stabilization rules that can address short-term legislative pathologies. Lawmakers have historically responded to legal cycles with patchwork repeal, amendment, and new enactment. Generally, patchwork lawmaking responds to legislative needs with relatively incomplete solutions when more complete and efficient solutions are available, and though each patchwork response introduces an opportunity for a beneficial policy update, each correspondingly hazards social loss. Madison remarked that “[t]o trace the mischievous effects of mutable government would fill a volume.” This chapter asserts that social losses from suboptimal responses to legal cycles can be characterized along two primary dimensions: losses due to inefficient interest group activity (aggregation costs) and losses due to policy errors that are largely driven by the types of cognitive biases endemic to change (error costs). In other words, the costs generated by problematic legal cycles tend, in the main, to remain frustratingly high because of the pleading of special interests as well as cognitive error-inducing change. The key to solving this problem is to create laws that discourage repeated and socially costly behaviors, but remain flexible enough to accommodate the cyclical legal environments in which those behaviors flourish.

This chapter develops a normative theory of how lawmakers should respond to legal cycles by setting forth the optimal architecture of stabilization rules. Under a general set of conditions, stabilization rules work toward smoothing fluctuations in rulemaking and exert downward pressure on short-term legislative pathologies that result from cognitive bias and interest group politics. The potential of welfare-enhancing stabilization rules is discussed across banking law, budget law, environmental law, health law, national security law, and criminal sentencing.

Keywords: legal cycles, timing rules, sunset clauses, stabilization rules

JEL Classification: K14, K22, K32, K34

Suggested Citation

Fagan, Frank, Legal Cycles and Stabilization Rules (October 2, 2017). The Timing of Lawmaking, Frank Fagan & Saul Levmore (eds.) Edward Elgar Ltd., 2017. Available at SSRN: https://ssrn.com/abstract=3046176

Frank Fagan (Contact Author)

EDHEC Business School ( email )

58 rue du Port
Lille, 59046
France

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