Judges' Cognition and Market Order

Review of Law and Economics, 2008, 4(2), 665-92

32 Pages Posted: 15 Nov 2005 Last revised: 23 Jul 2018

See all articles by Benito Arruñada

Benito Arruñada

Pompeu Fabra University - Department of Economics and Business; Barcelona GSE

Veneta Andonova

Universidad de los Andes, Colombia

Abstract

We argue that during the crystallization of common and civil law in the 19th century, the optimal degree of discretion in judicial rulemaking, albeit influenced by the comparative advantages of both legislative and judicial rulemaking, was mainly determined by the anti-market biases of the judiciary. The different degrees of judicial discretion adopted in both legal traditions were thus optimally adapted to different circumstances, mainly rooted in the unique, market-friendly, evolutionary transition enjoyed by English common law as opposed to the revolutionary environment of the civil law. On the Continent, constraining judicial discretion was essential for enforcing freedom of contract and establishing a market economy. The ongoing debasement of pro-market fundamentals in both branches of the Western legal system is explained from this perspective as a consequence of increased perceptions of exogenous risks and changes in the political system, which favored the adoption of sharing solutions and removed the cognitive advantage of parliaments and political leaders.

Keywords: Legal systems, institutional development, law enforcement

JEL Classification: K40, N40, O10

Suggested Citation

Arruñada, Benito and Andonova, Veneta, Judges' Cognition and Market Order. Review of Law and Economics, 2008, 4(2), 665-92. Available at SSRN: https://ssrn.com/abstract=848368

Benito Arruñada (Contact Author)

Pompeu Fabra University - Department of Economics and Business ( email )

Ramon Trias Fargas 25-27
Department of Economics and Business
Barcelona, 08005
Spain
+34 93 542 25 72 (Phone)
+34 93 542 17 46 (Fax)

HOME PAGE: http://www.econ.upf.edu/~arrunada

Barcelona GSE ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Veneta Andonova

Universidad de los Andes, Colombia ( email )

Carrera Primera # 18A-12
Bogota, DC D.C. 110311
Colombia

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