Optimal Discretion in the Application of Rules

28 Pages Posted: 4 May 2005

See all articles by Steven Shavell

Steven Shavell

Harvard Law School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2005


Discretion is examined as a feature of the design of rule-guided systems. That is, given that rules have to be administered by some group of persons, called adjudicators, and given that their goals may be different from society's (or a relevant organization's), when is it socially desirable to allocate discretionary authority to the adjudicators and, if so, to what extent? The answer reflects a trade-off between the informational advantage of discretion - that adjudicators can act on information not included in rules - and the disadvantage of discretion - that decisions may deviate from the desirable because adjudicators' objectives are different from society's. The control of discretion through limitation of its scope, through decision-based payments to adjudicators, and through the appeals process, is also considered.

JEL Classification: D8, K4, K40

Suggested Citation

Shavell, Steven, Optimal Discretion in the Application of Rules (March 2005). Harvard Law and Economics Discussion Paper No. 509. Available at SSRN: https://ssrn.com/abstract=716921 or http://dx.doi.org/10.2139/ssrn.716921

Steven Shavell (Contact Author)

Harvard Law School ( email )

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National Bureau of Economic Research (NBER)

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