Well-Defined Economic Efficiency and the Common Law: The Rise, Fall and Rebirth of Economic Efficiency Applied to Law

Abstract

This article addresses the question of what economic efficiency is and why a proper understanding of it affects the economic efficiency claim that is made for common law. This understanding shows that a good deal of the criticism of the efficiency claim in fact are consistent with it. Justice and economic efficiency, properly defined have similar outcomes and similar and comparable roots so that a correspondence between them is not surprising. This article builds on the Rubin-Zywicki model to suggest additional support for elements of the efficiency claim and shows also additional reasons why it may be less strong than formerly. For example, the common law in its distributive role, where efficiency is often opaque so that the cost to judges of making rules that are inefficient are less than in other areas of the law, inefficiency is more likely to be found.

Keywords: efficiency, common law, well-defined efficiency

JEL Classification: K, K30, K20, K12, K13